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Modern Portfolio Mechanics · Money In Motion with Klaas Financial

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  Speaker 1: And phone lines.
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  Speaker 2: They are open for you right now if you have
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  Speaker 2: questions for our retirement planning professionals from Class Financial love
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  Speaker 2: to have you join us this morning. The number to
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  Speaker 2: get on the air six oh eight three two one
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  Speaker 2: thirteen ten. That's six oh eight three two one thirteen ten.
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  Speaker 2: Joined this morning by CJ. Closs and Eric Schwartz up
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  Speaker 2: Class Financial, the website class financial dot com. That's Claus
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  Speaker 2: k l aa s financial dot com. They're telephone number
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  Speaker 2: six oh eight four four two five six three seven.
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  Speaker 2: No charge for that initial get to know your appointment
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  Speaker 2: at Class Financial. It will be complimentary to you again.
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  Speaker 2: The office number six oh eight four four two five
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  Speaker 2: six three seven and the number to get on the
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  Speaker 2: air this morning six oh eight three two one thirteen ten.
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  Speaker 2: That's six oh eight three two one thirteen ten. As
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  Speaker 2: mentions joining us this week, CJ. Closs and Eric Schwartz. CJ,
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  Speaker 2: how you doing this morning?
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  Speaker 3: I'm doing great. Sean, how are you?
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  Speaker 1: I'm doing really well.
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  Speaker 2: I'm gonna have to share with you guys after the
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  Speaker 2: show a video that my son sent me about, uh
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  Speaker 2: about how to transfer for that because he's an only child,
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  Speaker 2: how to transfer the house to him someday by putting
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  Speaker 2: in a trust and then a step up a basis
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  Speaker 2: he's talking about and I'm like talking about kiddo and
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  Speaker 2: uh yeah.
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  Speaker 1: So I'll just share with you guys.
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  Speaker 3: It sounds like he's been listening to Money in Motion.
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  Speaker 2: I think so Eric, he maybe he may be stopping
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  Speaker 2: down to visit CJ. This morning.
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  Speaker 1: How you doing?
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  Speaker 4: I am doing great. It sounds like sounds like he's
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  Speaker 4: thinking ahead, good stuff.
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  Speaker 1: Well he does.
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  Speaker 2: He sometimes he also like when he was really little,
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  Speaker 2: I have like a Simpson's collection.
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  Speaker 1: He'd look at it.
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  Speaker 2: He goes, so, Dad, when you pass away, although he's
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  Speaker 2: I think he said, die, He's like, this is all mine.
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  Speaker 1: Right, don't don't go there, buddy, don't go Oh goodness,
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  Speaker 1: oh man. Yeah.
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  Speaker 2: Great to have both the along, of course, our retirement
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  Speaker 2: planning professionals a CJ.
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  Speaker 1: Closs at Eric Schwartz.
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  Speaker 2: They come to us from claus Financial online, Class Financial
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  Speaker 2: dot Com.
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  Speaker 1: We're gonna talk this week.
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  Speaker 2: I'm about strategies when it comes to portfolio construction. It
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  Speaker 2: kind of plays off we talked a couple of weeks ago.
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  Speaker 2: The topic was kind of that investor in the mirror,
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  Speaker 2: and we're going to kind of work off of that
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  Speaker 2: and advance that topic quite a bit this week in
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  Speaker 2: our conversation. Don't forget as always, you miss any part
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  Speaker 2: of the show, you can listen back at clossfinancial dot com.
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  Speaker 2: You can also subscribe to the podcast right online and
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  Speaker 2: schedule a complementary chat at cossfinancial dot com speaking up
• 2:19
  Speaker 2: that complementary conversation. You can also call the office right
• 2:22
  Speaker 2: here in Madison at six eight four four two five
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  Speaker 2: six three seven. No charge for that initial get to
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  Speaker 2: know you appointment deek Loss Financial. It will be complementary
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  Speaker 2: to you again their number six soh eight four four
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  Speaker 2: two five six three seven. And before we start this
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  Speaker 2: week's conversation in chat, let's actually look back at last
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  Speaker 2: week's show Eric and get the Closs quiz question and
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  Speaker 2: answer there as well.
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  Speaker 4: Yeah, so last week we were talking about health insurance,
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  Speaker 4: specifically your your major medical health insurance and kind of
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  Speaker 4: what some of your options are if you don't have
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  Speaker 4: insurance available through your employer. So the question was true
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  Speaker 4: or false ACA, which stands for Affordable Care Act. ACA
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  Speaker 4: compliant health insurance plans must meet the same baseline standards
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  Speaker 4: as employer plans. So this is a big topic of
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  Speaker 4: our show last week, and of course the answer to
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  Speaker 4: that is true.
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  Speaker 2: Fantastic congratulations to last week's winner. We'll have another winner
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  Speaker 2: this week, our friends from Class Financial with the Class
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  Speaker 2: Quiz question week that provided a twenty five dollars gift
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  Speaker 2: card to dart In Restaurants. Again a little tip lists
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  Speaker 2: and closely to the program because just about every show,
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  Speaker 2: the question and answer come up during the program, and
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  Speaker 2: I'll tell you again a little bit later in the
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  Speaker 2: program in detail how you can win that prize.
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  Speaker 1: And CJ.
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  Speaker 2: You know, in a previous show we talked about the
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  Speaker 2: investor in the mirror and managing our gut reactions, our
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  Speaker 2: emotion of course, our biases and other things that can
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  Speaker 2: ultimately sabotage our best intentions. Today we're going to kind
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  Speaker 2: of shifting gears a bit and we're going to be
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  Speaker 2: looking at what's under the hood when it comes to
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  Speaker 2: an investment portfolio that kind of really does kind of
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  Speaker 2: act as that engine for investors, doesn't it.
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  Speaker 4: CJ.
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  Speaker 3: Yeah, that's right, Sean. And to your point, on this show,
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  Speaker 3: we often are talking about financial planning techniques. We actually
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  Speaker 3: call this one of our distinctives is that we we
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  Speaker 3: do planning first and then investing next, meaning we want
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  Speaker 3: to know what the money is for, how it's going
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  Speaker 3: to be tax efficient, how all of that before we
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  Speaker 3: get into investments. However, for those who are more of
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  Speaker 3: the do it yourselfer type, or maybe just have all
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  Speaker 3: their money in their four and K four three B,
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  Speaker 3: knowing how to invest and how to avoid big mistakes
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  Speaker 3: is pretty critical because the difference between a four percent
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  Speaker 3: return versus a six percent return over a forty year
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  Speaker 3: timeframe is quite significant. So think of your portfolio again.
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  Speaker 3: When I say portfolio, this could be a taxable account,
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  Speaker 3: A four one K four three B IRA ROTH IRA
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  Speaker 3: is just all of those investments and securities. Think of
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  Speaker 3: those as one big portfolio, but think of them not
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  Speaker 3: as a single bucket of money, but as a machine
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  Speaker 3: with different parts that are built for different jobs and
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  Speaker 3: different speeds. So well designed portfolio isn't trying to just
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  Speaker 3: do one thing. It's trying to do multiple things at once,
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  Speaker 3: and that's why so many consumers make mistakes with their design.
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  Speaker 3: So let's start with some of the key elements of
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  Speaker 3: this portfolio that's doing multiple things. First, there's the growth core.
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  Speaker 3: These are your equities These are your stocks or stock
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  Speaker 3: based investment stock based mutual funds. This is the engine
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  Speaker 3: that provides the horse power for the long haul in
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  Speaker 3: your portfolio. Growth assets are designed for money you won't
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  Speaker 3: need for many years. Their job is to outpace inflation,
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  Speaker 3: compound over time, and build purchasing power for the future.
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  Speaker 3: They will be volatile, but that's not a bug, it's
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  Speaker 3: a feature. Remember that volatility is not a bug, it's
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  Speaker 3: a feature of investing in stocks. So volatility is simply
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  Speaker 3: the price of admission for law term growth. The second
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  Speaker 3: part of your portfolio, and again we're using portfolio almost
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  Speaker 3: like a car here, everybody right if you're picking up
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  Speaker 3: on the innuendo. So the second part of your multi
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  Speaker 3: part car or portfolio is what we would call the stabilizers.
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  Speaker 3: These are your fixed income investments, bonds, bond funds, and
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  Speaker 3: other income oriented holdings. Their job isn't necessarily to win
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  Speaker 3: the race like it's like it is in the case
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  Speaker 3: of equities fixed income investments. Their job is to keep
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  Speaker 3: the car on the road. When the growth core hits
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  Speaker 3: a pothole when markets pull back, stabilizers can help to
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  Speaker 3: dampen the ride, provide balance and just as importantly, give
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  Speaker 3: us something to rebalance from without panicking. And then five
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  Speaker 3: or third. The third part of your portfolio is what
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  Speaker 3: we would call the liquidity reserve. This is often the
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  Speaker 3: most overlooked mechanic, but it's often the most important. This
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  Speaker 3: is your cash and short term holdings. Its sole job
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  Speaker 3: is to provide with flexibility. It ensures that you're not
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  Speaker 3: forced to sell your long term growth assets at exactly
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  Speaker 3: the wrong time just to pay bills, handle taxes, or
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  Speaker 3: cover an unexpected expense. So when we build portfolios, we're
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  Speaker 3: not just looking at generic market assumptions. We're looking at
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  Speaker 3: your personal inflation rate, the actual cost of maintaining your lifestyle.
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  Speaker 3: The goal in this whole kind of process of building
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  Speaker 3: your portfolio, much like the complexity of building a car,
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  Speaker 3: is to engineer things so that no single market outcome
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  Speaker 3: has to be the quote unquote right outcome for your
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  Speaker 3: plan to succeed. So this is the key, everybody. You
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  Speaker 3: have to have parts in there that work in different ways,
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  Speaker 3: in different features, kind of like a car. Right, If
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  Speaker 3: you look at a car and you look underneath it
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  Speaker 3: and you go, what is that spring for?
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  Speaker 1: Right?
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  Speaker 3: I imagine your son or daughter looking at what the
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  Speaker 3: heck is that spring for? And that was a h
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  Speaker 3: as we go, Well, that's to make sure that when
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  Speaker 3: I drive over a pothole it doesn't feel like crazy
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  Speaker 3: in the car. And then and then your center daughter goes.
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  Speaker 1: But how does that make me go faster?
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  Speaker 3: Right?
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  Speaker 1: Yeah, well it doesn't.
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  Speaker 3: It actually slows down the car.
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  Speaker 1: Yeah, but you get the idea.
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  Speaker 3: A portfolio is similar. There's things in it that are
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  Speaker 3: not going to make you quote unquote win the race
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  Speaker 3: or go faster. There's things that are going to dampen
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  Speaker 3: the fall when markets get get shaky.
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  Speaker 1: Really good illustration there. As we talked this morning with c. J.
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  Speaker 2: Class and Eric Schwartz, our retirement planning professionals from Class
• 8:30
  Speaker 2: Financial Online colss financial dot com. That's COSS k l
• 8:34
  Speaker 2: a A S Financial dot com and their telephone number
• 8:37
  Speaker 2: six o eight four four two five six three seven.
• 8:40
  Speaker 2: No charge for that initial get to know your appoyment
• 8:42
  Speaker 2: at COSS Financial. It will be complimentary to you again
• 8:45
  Speaker 2: their number six oh eight four four two five six
• 8:47
  Speaker 2: three seven. So Eric, we talk about kind of the
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  Speaker 2: idea of engineering and cars and the mechanics of it all.
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  Speaker 2: Let's kind of get a little more technical and uh,
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  Speaker 2: and talk about how the rules based system acts actually
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  Speaker 2: protects an investor.
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  Speaker 4: Yeah, I just want to say I really love CJ's
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  Speaker 4: analogy there of the car. I do have to admit though,
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  Speaker 4: that I didn't know what the spring did. So I'm
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  Speaker 4: just like, just like the kids, I didn't.
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  Speaker 3: Know what I'm here for you, Eric, thank you.
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  Speaker 4: I appreciate that for you. Oh my gosh. All right,
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  Speaker 4: So Sean, getting back to your question here, most people
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  Speaker 4: will wait until they feel danger or or something forces
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  Speaker 4: them to act, and realistically, by then it is it's
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  Speaker 4: just way too late. Mechanical investing kind of does the opposite.
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  Speaker 4: It removes the emotion from from your decision making by
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  Speaker 4: using written rules long before stress enters the picture. Okay,
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  Speaker 4: So that's where the written investment policy comes in, because
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  Speaker 4: if you think about it, I would I would say
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  Speaker 4: probably the worst time to make a decision is when
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  Speaker 4: you are feeling anxious or you're feeling danger. You're not
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  Speaker 4: going to be thinking with a level head. So how
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  Speaker 4: do we how do we remove those decisions from that
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  Speaker 4: stressful time. We make them in advance and we write
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  Speaker 4: it down. Okay, So the first thing within the written
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  Speaker 4: investment policy is going to be what we call target
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  Speaker 4: ranges or tolerance bans. So let's just take, for example,
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  Speaker 4: an investor that we have their portfolio set to about
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  Speaker 4: sixty percent in stocks. So as CJ was saying sixty
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  Speaker 4: percent in that growth engine and then about forty percent
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  Speaker 4: approximately in fixed income or in that more supportive income
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  Speaker 4: bearing part of the portfolio, We're not just going to say, okay,
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  Speaker 4: you're sixty percent in stocks. That's that's where we want you.
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  Speaker 4: Because the market moves every day, right, and bonds pay
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  Speaker 4: interest and stocks go up and down. So if markets
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  Speaker 4: do well in that sixty percent drifts to seventy percent,
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  Speaker 4: that drift then becomes information to us that tolerance banned.
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  Speaker 4: So when I say tolerance banned, I mean the percent
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  Speaker 4: change we are comfort with from that initial target. So
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  Speaker 4: let's just use an example here. If our target is
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  Speaker 4: sixty percent in stocks, we may say, okay, we're okay
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  Speaker 4: if that drifts up to as high as sixty two
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  Speaker 4: and maybe down to as low as fifty eight. Now
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  Speaker 4: that's not exactly what we do, but that's an example.
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  Speaker 4: I can hear Josh, our chief investment officer, listening to
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  Speaker 4: this going, that's not exactly how to plan, but just
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  Speaker 4: just stick with me here.
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  Speaker 1: Okay.
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  Speaker 4: So we say, hey, we're starting out at sixty, but
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  Speaker 4: the market's going to move. We don't want to be,
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  Speaker 4: you know, reacting and trading every time it moves from
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  Speaker 4: sixty percent exactly right, So we build that tolerance band,
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  Speaker 4: and then the tolerance band when we when we exceed that,
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  Speaker 4: that triggers a rebalance. Okay, And we're not doing this
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  Speaker 4: because we're predicting a downturn, but it's because the portfolio
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  Speaker 4: has moved out of our initial alignment. And we chose
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  Speaker 4: that initial alignment based on a number of factors that
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  Speaker 4: we'll talk a little bit more about later, but we
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  Speaker 4: chose that percentage for a reason. That is the amount
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  Speaker 4: that that the investor is comfortable with. That is the
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  Speaker 4: portfolio that has the opportunity to create the return that
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  Speaker 4: that investor needs throughout retirement. So first first range there,
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  Speaker 4: or first piece of the written investment policy, is our
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  Speaker 4: target range or our tolerance bans. The second part.
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  Speaker 3: Of the.
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  Speaker 4: Of the mechanical based investing here is what we call
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  Speaker 4: trimming high. So when when the tolerance bans trigger a rebalance,
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  Speaker 4: the system is mathematically forcing you to sell portions of
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  Speaker 4: what has done well. Right, So when it's theoretically more
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  Speaker 4: expensive than when you purchased it now, it could be
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  Speaker 4: hard to do that emotionally, right because you're like, hey,
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  Speaker 4: that's that's going up. Why am I gonna Why am
• 12:49
  Speaker 4: I going to sell that? Right? But if you if
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  Speaker 4: you think about it, it's it is the probably in
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  Speaker 4: that moment, the correct thing to do. And when you
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  Speaker 4: have a mechanical process in place, you've made that decision
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  Speaker 4: in advance, it becomes much easier and you can you
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  Speaker 4: can say, you know what the reason that I want
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  Speaker 4: to actually sell that position is because let's say, for example,
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  Speaker 4: it's it's your stockholdings. If they've gone up, that means
• 13:15
  Speaker 4: you have more risk in your portfolio because you hold
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  Speaker 4: more stocks, right, So the responsible thing to do would
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  Speaker 4: be to rebalance that and move some of it over
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  Speaker 4: to that more conservative side. So the last piece of
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  Speaker 4: this is buying low. So just the same as trimming high,
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  Speaker 4: you are automatically moving money into areas that have underperformed,
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  Speaker 4: or you could say they're effectively on sale. Right, So
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  Speaker 4: by sort of we'll say trimming your gains and then
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  Speaker 4: reinvesting them in a part of the portfolio that has
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  Speaker 4: not done as well we are. We're doing that kind
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  Speaker 4: of old adage that buy low, sell high, just automatically
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  Speaker 4: through the through the rules basis them here. The best
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  Speaker 4: part of all of this is you're not guessing okay,
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  Speaker 4: you're not reacting to headlines. You're simply maintaining the structural
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  Speaker 4: integrity of the machine that you've that you've already designed.
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  Speaker 4: And the best part is you do not need to
• 14:16
  Speaker 4: react or feel additional concern about what should I be
• 14:21
  Speaker 4: doing or what should I not be doing when the
• 14:22
  Speaker 4: market is volatile. You've already decided all of that.
• 14:25
  Speaker 2: Really interesting stuff this Marri as we talk with Eric
• 14:28
  Speaker 2: Schwartz and CJ. Closs out retirement planning professionals from Class
• 14:31
  Speaker 2: Financial online Coss Financial dot com. That's Class K l
• 14:35
  Speaker 2: a A S Financial dot com. Seric laid out that
• 14:38
  Speaker 2: written investment policy. What's all going into it? Sometimes their
• 14:41
  Speaker 2: potential for a mismatch when it comes to the portfolio
• 14:45
  Speaker 2: versus the person. Well, we'll get the details from Cjen Eric.
• 14:48
  Speaker 2: We will do that next as Money in Motion with
• 14:50
  Speaker 2: Coss Financial continues right here on thirteen ten. Dol wiu
• 14:53
  Speaker 2: I b I talking with our retirement planning professionals A.
• 14:56
  Speaker 1: CJ. Closs and Eric Schwartz.
• 14:57
  Speaker 2: Of course they come to us from COSS Financial the
• 15:00
  Speaker 2: website Coss financial dot com. That's Coss k l A
• 15:04
  Speaker 2: A S Financial dot com. You can learn more about
• 15:06
  Speaker 2: class financial on the website. You can get to know
• 15:08
  Speaker 2: Eric and CJ. And Josh who was mentioned earlier. Josh Sterling,
• 15:12
  Speaker 2: of course, can learn about him as well at clausfinancial
• 15:14
  Speaker 2: dot com. Great day to pick up the phone, make an appointment.
• 15:16
  Speaker 2: Don't forget that initial gets to know you conversation at
• 15:18
  Speaker 2: Cossfinancial will be complimentary to you. There number six so
• 15:21
  Speaker 2: eight four four two, five, six three seven and CJ.
• 15:25
  Speaker 2: Just before the break, Eric laid out very nicely what
• 15:29
  Speaker 2: goes into a written investment policy, some of the some
• 15:32
  Speaker 2: of the details on that. So when you have the
• 15:35
  Speaker 2: system that you know really keeps the investor from becoming
• 15:38
  Speaker 2: their own worst enemy. How often do you seek a
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  Speaker 2: mismatch then, though, between what a portfolio is built to
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  Speaker 2: do and what the investor can actually handle.
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  Speaker 3: Yeah, good question. Unfortunately it's it's more often than we'd
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  Speaker 3: like to admit, and that mismatch is where real damage
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  Speaker 3: can actually happen. So insider off office. We often refer
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  Speaker 3: to the prior sections we just talked about as the
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  Speaker 3: quantitative aspects of portfolio management. But where things can really
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  Speaker 3: go wrong is surrounding is surrounding that the qualitative askmak.
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  Speaker 3: So again, quantitative is one thing, but qualitative is a
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  Speaker 3: whole other, and that's where things can go really wrong.
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  Speaker 3: This is why you'll often hear advisors at our office
• 16:24
  Speaker 3: say that financial planning and portfolio management is as much
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  Speaker 3: an art as it is a science. So said another way,
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  Speaker 3: we can quantify most aspects of financial planning and portfolio management,
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  Speaker 3: but if we fail to consider a client's behavioral biases
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  Speaker 3: or risk tolerance, also known as those qualitative aspects, then
• 16:43
  Speaker 3: a plan can still easily fail during implementation. This is
• 16:48
  Speaker 3: why we look for something that we call like the
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  Speaker 3: breaking point. So the first breaking point is what we
• 16:53
  Speaker 3: would call a fifteen percent test. If a portfolio is
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  Speaker 3: structured or designed or structured to fluctuate by twenty five
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  Speaker 3: percent in pursuit of a certain return, but the investor's
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  Speaker 3: emotional breaking point is that a fifteen percent decline. That's
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  Speaker 3: not a discipline problem, it's a structural flaw. Right, And
• 17:14
  Speaker 3: actually we can measure these things. Right, Hey, this portfolio
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  Speaker 3: standard deviation over time has been up of upwards of
• 17:21
  Speaker 3: twenty five percent. If we say, well, your financial plan
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  Speaker 3: can handle that, but then fifteen percent down the client
• 17:28
  Speaker 3: bails on the ride. You get the idea, What good
• 17:32
  Speaker 3: was our financial plan given that it didn't take into
• 17:34
  Speaker 3: account the qualitative risk tolerance of the client. So the
• 17:40
  Speaker 3: second kind of test that we look at is a
• 17:43
  Speaker 3: time horizon mechanics. So money needed in the next three
• 17:47
  Speaker 3: years should not be in the same growth core portfolio
• 17:51
  Speaker 3: as money that would be invested over a long period
• 17:54
  Speaker 3: of time. So there's often a time horizon mechanical problem.
• 18:00
  Speaker 3: So if short term money is exposed to long term volatility,
• 18:04
  Speaker 3: a temporary market dip can quickly become a permanent loss.
• 18:08
  Speaker 3: And that's not bad luck, by the way, that's just
• 18:10
  Speaker 3: broken mechanics. So again, I think of it as, oh,
• 18:15
  Speaker 3: somebody gives me money for a down payment on their
• 18:18
  Speaker 3: first ever home, and I fail as a financial advisor
• 18:22
  Speaker 3: fiduciary to say, what is this money for? Right, And
• 18:25
  Speaker 3: by the way, we don't do this. I'm just I'm
• 18:27
  Speaker 3: using a terrible example to make me look horrible if
• 18:30
  Speaker 3: I do that. And I go, oh, you're twenty two
• 18:33
  Speaker 3: years old. I'm assuming this is just retirement money, but
• 18:35
  Speaker 3: I never asked you. So I'll put it in one
• 18:37
  Speaker 3: hundred percent equity portfolio. And then markets go down, and
• 18:40
  Speaker 3: a year later that couple comes back to me and says,
• 18:42
  Speaker 3: I need my money for my down payment of the home,
• 18:45
  Speaker 3: and they're down twenty percent.
• 18:47
  Speaker 1: You get the idea.
• 18:49
  Speaker 3: So again, the first test we talked about was kind
• 18:51
  Speaker 3: of the volatility test. Can you take on the personal
• 18:55
  Speaker 3: amount of risk, tolerance of volatility the portfolio is designed for.
• 18:59
  Speaker 3: Number two is what we call the time horizon mechanics test,
• 19:03
  Speaker 3: and then the third component is the equity floor. So
• 19:06
  Speaker 3: on the other side, being too conservative with your investments
• 19:10
  Speaker 3: or portfolio allocation has its own set of risks. If
• 19:14
  Speaker 3: a portfolio doesn't have enough growth to outpace inflation, purchasing
• 19:19
  Speaker 3: power erodes quietly over time, something we like to call
• 19:22
  Speaker 3: the silent killer. That's a slower failure, but it's still
• 19:27
  Speaker 3: a mechanical failure. So the right portfolio lives in the
• 19:31
  Speaker 3: narrow space between where the investor can stay invested and
• 19:35
  Speaker 3: the math still works.
• 19:37
  Speaker 2: Really great perspective, and you talk about talk about just
• 19:40
  Speaker 2: kind of personal behaviors and these type of things, and
• 19:42
  Speaker 2: understanding some of the as you point out, the art
• 19:46
  Speaker 2: as well as the science of this.
• 19:47
  Speaker 1: We talk with CJ. Closs and Eric Swartz.
• 19:50
  Speaker 2: Of course you can learn more online Cossfinancial dot Com.
• 19:52
  Speaker 2: That's CLSs k l a as Financial dot Com and
• 19:55
  Speaker 2: Eric as CJ framed it so nicely there talk about
• 20:00
  Speaker 2: why this modern mechanics approach beat kind of relying on
• 20:04
  Speaker 2: the investor in the mirror just about every time, every time,
• 20:07
  Speaker 2: let's every time.
• 20:10
  Speaker 4: Yeah, Sean, I think it comes down to the fact
• 20:12
  Speaker 4: that as much as we like to think we can
• 20:15
  Speaker 4: control everything going on in our lives, we really can't
• 20:18
  Speaker 4: write and you certainly can't control the news. You can't
• 20:22
  Speaker 4: you can't control interest rates, geopolitics, market cycles. We're seeing
• 20:27
  Speaker 4: this right now, right I'm sure listeners can say, you know,
• 20:29
  Speaker 4: we certainly can't control what's happening in the world right now.
• 20:32
  Speaker 4: But what you can control is your asset allocation and
• 20:36
  Speaker 4: how you approach your investments. Okay, you can control how
• 20:39
  Speaker 4: your portfolio is built, so you can control how it's
• 20:42
  Speaker 4: maintained and how the decisions actually get made. So we're
• 20:46
  Speaker 4: trying to transition from something that feels very out of
• 20:49
  Speaker 4: control to something that we can actually feel more comfortable with.
• 20:55
  Speaker 4: So just a few closing thoughts here, Please don't try
• 20:58
  Speaker 4: to do this alone. Use a support system that holds
• 21:02
  Speaker 4: you accountable to the plan, not your emotions, because even
• 21:07
  Speaker 4: the best built machine here, even if it's all built correctly,
• 21:14
  Speaker 4: it fails if you don't follow the rules of the system. Okay,
• 21:17
  Speaker 4: And the reason that we're building it this way is
• 21:18
  Speaker 4: so that you don't need to be brave during a
• 21:20
  Speaker 4: market crash. You've already made those decisions ahead of time.
• 21:24
  Speaker 4: And the last thing I'll say here is a lot
• 21:26
  Speaker 4: of what we've discussed today. You know, we I think
• 21:29
  Speaker 4: we tried to simplify a lot of it, but it
• 21:31
  Speaker 4: is it's very complex. We have a whole department within
• 21:34
  Speaker 4: our organization here that handles this. So what it really
• 21:38
  Speaker 4: comes down to, I think, is finding an advisor and
• 21:41
  Speaker 4: affirm that you trust right, because when when the market
• 21:46
  Speaker 4: becomes volatile, if you you know, rather than saying I
• 21:49
  Speaker 4: understand the ins and out it's and everything that you
• 21:51
  Speaker 4: know that needs to be done with my portfolio and
• 21:54
  Speaker 4: all these things, that's a lot more difficult than being
• 21:57
  Speaker 4: able to say, you know what, I trust my financial
• 22:00
  Speaker 4: planner and the plan that we've built together. I trust
• 22:04
  Speaker 4: that you know they've built a portfolio that works specifically
• 22:08
  Speaker 4: for me and not just the next person. That is
• 22:11
  Speaker 4: a powerful piece. That is when you can find some
• 22:15
  Speaker 4: some solace and relieve some stress when when things get
• 22:18
  Speaker 4: a little wild.
• 22:19
  Speaker 2: It's amazing stuff. As we talked this morning, a lot
• 22:22
  Speaker 2: to take in, a lot to learn. Don't forget if
• 22:23
  Speaker 2: you missed any part of the show, you can always
• 22:25
  Speaker 2: listen back at Cossfinancial dot com. That's Coss k l
• 22:28
  Speaker 2: a a s Financial dot com. Also there you can
• 22:31
  Speaker 2: schedule a complementary chat and appointment right online Cossfinancial dot
• 22:35
  Speaker 2: com or you pick up phone, gave a call six
• 22:37
  Speaker 2: oh eight four four two five six three seven. No
• 22:40
  Speaker 2: charge for that initial gets to no appointment at costs financially,
• 22:43
  Speaker 2: it will be complimentary to you again their number six
• 22:45
  Speaker 2: oh eight four four two five six three seven. We'll
• 22:48
  Speaker 2: head on over to the Money in Motion listener question corner.
• 22:51
  Speaker 2: We'll also do our class quiz Question of the week,
• 22:53
  Speaker 2: that and so much more next as Money in Motion
• 22:55
  Speaker 2: with Coss Financial continues right here on thirteen ten doll
• 22:58
  Speaker 2: will you ib I talking with our retirement planning professionals
• 23:01
  Speaker 2: from Class Financial, CJ. Coss and Eric Schwartz. Don't forget
• 23:04
  Speaker 2: about the website Coloss Financial dot com. That's Coss Klaas
• 23:08
  Speaker 2: Financial dot com.
• 23:09
  Speaker 1: Great website.
• 23:10
  Speaker 2: Listen back to the podcast scheduled complementary conversation. You can
• 23:13
  Speaker 2: also submit a question right online to be answered in
• 23:17
  Speaker 2: the Money and Motion listener question corner. And as we
• 23:19
  Speaker 2: wrap up this week, we did get an email, a
• 23:22
  Speaker 2: great one from Mark Mark Wrights that he says, I'm
• 23:25
  Speaker 2: self employed. In shopping for health insurance, I keep seeing
• 23:28
  Speaker 2: ads for health sharing plans that say they're much cheaper
• 23:32
  Speaker 2: than traditional health insurance. They say members quote share medical
• 23:36
  Speaker 2: costs instead of paying premiums. Are these the same as
• 23:40
  Speaker 2: major medical plans under the Affordable Care Act? And are
• 23:43
  Speaker 2: they a good alternative? And Eric, I'm going to step
• 23:46
  Speaker 2: away from this one and you have at it.
• 23:49
  Speaker 4: This is a great question, Mark, and I hope, or
• 23:53
  Speaker 4: I imagine maybe that you listen to our show from last week,
• 23:56
  Speaker 4: since we talked about major medical health insurance plans. If
• 24:00
  Speaker 4: you didn't, I'd encourage you to head to our website
• 24:02
  Speaker 4: or to your podcast app to to listen back to that.
• 24:05
  Speaker 4: I think it could be helpful. But this is a
• 24:08
  Speaker 4: this is a really common question right now, and it's
• 24:11
  Speaker 4: largely the reason that we wanted to do the show
• 24:13
  Speaker 4: we did last week. And I'm really glad you asked,
• 24:16
  Speaker 4: because while these options can sound similar, they are very
• 24:20
  Speaker 4: different mechanically. Okay, and again, as always, we're not here
• 24:25
  Speaker 4: to tell you what's what's good, bad, or right for you.
• 24:27
  Speaker 4: We just want to give you the information so you
• 24:29
  Speaker 4: can make an informed decision. So let's just start with
• 24:32
  Speaker 4: a quick overview of major medical insurance under the Affordable
• 24:36
  Speaker 4: Care Act, or the ACA. So, an ACA compliant plan
• 24:41
  Speaker 4: is regulated insurance. It must cover essential health benefits. It
• 24:45
  Speaker 4: cannot deny you or charge you more due to your
• 24:48
  Speaker 4: pre existing conditions. That is a huge feature of an
• 24:53
  Speaker 4: ACA compliant plan. That is important that coverage for pre
• 24:57
  Speaker 4: existing conditions. An ACA compliance plan also has caps on
• 25:01
  Speaker 4: out of pocket costs, and you could qualify for premium
• 25:04
  Speaker 4: subsidies based on your income. Okay, and again you will
• 25:10
  Speaker 4: hear listeners from last week, will remember ACA compliant plans
• 25:14
  Speaker 4: are private insurance plans. Okay, So they're offered by United
• 25:18
  Speaker 4: Health or ATNU or whoever it might be, but they
• 25:22
  Speaker 4: are generally marketed through the health insurance exchanges and must
• 25:27
  Speaker 4: meet certain requirements that I just outlined there. So in short,
• 25:31
  Speaker 4: ACA compliant plans are designed to be comprehensive and predictable,
• 25:35
  Speaker 4: especially in what we might call like the worst case
• 25:38
  Speaker 4: medical scenario. Now, on the other hand, health sharing plans
• 25:43
  Speaker 4: these are sometimes called medical cost sharing plans. They work differently. Okay,
• 25:47
  Speaker 4: so they're not technically insurance, and they are typically membership
• 25:51
  Speaker 4: based programs where participants agree to help hate each other's
• 25:54
  Speaker 4: medical bills. Okay. Now, importantly, because they are not insurance,
• 25:59
  Speaker 4: they are not regularly the same way as a major
• 26:02
  Speaker 4: medical ACA plan. They do not have to cover pre
• 26:05
  Speaker 4: existing conditions, and there is no guarantee that a medical
• 26:09
  Speaker 4: bill will be paid.
• 26:10
  Speaker 3: Okay.
• 26:11
  Speaker 4: They can also exclude certain services entirely. Now, this would
• 26:16
  Speaker 4: be something that you'd want to check into before you
• 26:19
  Speaker 4: before you actually sign up for the plan. And the
• 26:22
  Speaker 4: other part of this is many of them also require
• 26:24
  Speaker 4: lifestyle or religious affirmations, and some will limit how much
• 26:28
  Speaker 4: they'll share for like a single medical event. Okay, So
• 26:32
  Speaker 4: all these reasons are why the monthly cost is often lower.
• 26:36
  Speaker 4: It's generally because the protections are also lower. So the
• 26:39
  Speaker 4: biggest trade off between the two of these is certainty. Okay,
• 26:43
  Speaker 4: So with major medical insurance or ACA plans, you're transferring
• 26:47
  Speaker 4: risk to an insurance company, and that insurance company is
• 26:50
  Speaker 4: contractually obligated to pay the covered claims. With the health
• 26:54
  Speaker 4: sharing plans, you're participating in what we would call a
• 26:57
  Speaker 4: voluntary system, and if there's a dispute or where if
• 27:00
  Speaker 4: funds are limited, there's no legal guarantee of actual payment.
• 27:04
  Speaker 4: For some people, especially those who are really healthy, and
• 27:07
  Speaker 4: they understand the limitations of the health sharing plans and
• 27:11
  Speaker 4: have strong cash reserves, these plans might be a reasonable option,
• 27:15
  Speaker 4: right you sort of self ensuring, you could say, by
• 27:18
  Speaker 4: having high cash reserves and participating in a plan that
• 27:22
  Speaker 4: provides less coverage. But we do generally caution people not
• 27:27
  Speaker 4: to confuse this lower cost with the same protection. They're
• 27:31
  Speaker 4: built for very different purposes, and like most financial decisions,
• 27:36
  Speaker 4: what's appropriate really depends on the individual situation. And just
• 27:40
  Speaker 4: like investing health insurance really isn't about chasing the lowest cost.
• 27:43
  Speaker 4: It's about building the right protection for your plan for
• 27:47
  Speaker 4: your family.
• 27:48
  Speaker 2: Great email, great question, mark, don't forget you two can
• 27:50
  Speaker 2: be like Mark. If you've got a question for our
• 27:52
  Speaker 2: retirement planning professionals from Class Financially, you can always email.
• 27:55
  Speaker 2: Just send it over to Cossfinancial dot com. They're tell
• 27:57
  Speaker 2: for what number six so weight four four to two five,
• 28:00
  Speaker 2: six three seven. No charge for that initial get to
• 28:02
  Speaker 2: know your appointments at COSS Financial. It will be complimentary
• 28:04
  Speaker 2: to you again their number six oh eight four four
• 28:07
  Speaker 2: two five six three seven. You want to hold on
• 28:09
  Speaker 2: to that telephone number because it's time now for the
• 28:10
  Speaker 2: Coss Quiz Question the Week. It works like this. In
• 28:13
  Speaker 2: just moment, I'll ask you the Coss Quiz question of
• 28:15
  Speaker 2: the week. You will then have thirty minutes from the
• 28:16
  Speaker 2: end today's program to call the Class Financial office right
• 28:19
  Speaker 2: here in Madison at six oh eight four four two
• 28:21
  Speaker 2: five six three seven. If you are the first call
• 28:24
  Speaker 2: correct answer, you win this week's prize, which is a
• 28:27
  Speaker 2: twenty five dollars gift card to Darden Restaurants. This week's
• 28:31
  Speaker 2: Closs Quiz Question the Week is this true or false?
• 28:34
  Speaker 2: The advertisers at Coss Financial belief financial planning and portfolio
• 28:40
  Speaker 2: management is as much of an art as it is
• 28:43
  Speaker 2: a science. True or false telephon number six oh eight
• 28:46
  Speaker 2: four four two five six three seven.
• 28:48
  Speaker 1: Don't forget.
• 28:48
  Speaker 2: That's class financial office right here in Madison as well.
• 28:52
  Speaker 1: CJ.
• 28:52
  Speaker 3: Eric.
• 28:52
  Speaker 2: It's always great chatting with both of you. You guys
• 28:54
  Speaker 2: have a fantastic Dan and we'll do it all again
• 28:56
  Speaker 2: real soon.
• 28:57
  Speaker 3: Thanks all, Thanks Sean
• 28:58
  Speaker 1: News comes your way next year on third seen ten
• 29:00
  Speaker 1: double U I B A