Latest / The Personal Finance Club Show / The $50,000/month Trust, Merging Roths, and When to Hire a Financial Advisor | Ep 21

Transcript

The $50,000/month Trust, Merging Roths, and When to Hire a Financial Advisor | Ep 21 · The Personal Finance Club Show

0:13
Welcome back to the Personal Finance Club show.
0:16
Hey, Jen. What's up, Jeremy?
0:18
A Lot, Episode 21. Crazy.
0:23
I know we only we only have 979 to go before we get 1000.
0:29
It's. That it's going fast.
0:31
Thank you. So Once Upon a time we tried to
0:36
guess each other's celebrity guesses, and I didn't guess this
0:39
person. But this man is about to scale
0:43
some building in Taipei, I believe.
0:45
Yes. So you decided to.
0:47
Make by about to you mean it happened 2 weeks ago or a week
0:51
and 1/2? Ago.
0:52
Yeah, that's right. They know we recorded in
0:55
advance. Yeah, when we were recording
0:56
this. Yeah.
0:58
And I and everyone is saying how dangerous it is to climb a
1:02
building. And so this morning on the way
1:05
to work, I was like, you know what?
1:06
I'm going to prove them wrong, and I'm going to show how safe
1:08
it is to climb a building. And so I record.
1:10
I made a little video of myself scaling the side of, you know,
1:14
my building's only four stories tall.
1:16
So you know he's climbing like Taipei one O 1, which is 100
1:20
source haul. If he dies, by the way, we're
1:22
going to have to delete this episode.
1:24
Imagine. No, he.
1:25
Won't I don't think he will I. Think so?
1:27
It's happening like right now, right?
1:29
No, it it's happening at it's happening at 5:00 PM.
1:32
Oh, are you going to watch? Heck yeah.
1:34
OK, that's your boy. Yeah.
1:36
It's so funny because, like, between episodes, I looked at my
1:38
texts and my best friend has sent me this post that because
1:41
Jeremy is the wild, Wild West on Instagram.
1:43
Like I don't know what I'm going to find when I go into his
1:45
stories. I'm just like, Oh my gosh.
1:47
So I get, I get on Instagram, I see Jeremy, I think, did you,
1:51
did you make the thumbnail like something ridiculous on purpose
1:54
or was that an accident 'cause I think the thumbnail was you like
1:57
kind of like with your leg. I was like, what is he doing?
2:00
The thumbnail is a legitimate I mean, so just to fill everyone
2:02
in the joke, like I attempted to, you know, free solo the side
2:07
of my building and made it about 6 inches off the ground from
2:10
jumping once. Because while if you can climb a
2:14
building, it's probably very dangerous to climb a building,
2:17
but if you can't climb a building like me, it's extremely
2:19
safe. I went nowhere.
2:21
And so I thought that was kind of the absurdity of how safe it
2:24
can be to climb a building if you're like me and can't can't
2:27
get off the ground at all. But no, that was.
2:30
Enough. You're like mid air.
2:32
It's a legit, it's a legit thumbnail.
2:33
It's me. I had two people in the comments
2:36
already ripping on me for having a low vertical.
2:37
I was like that was my Max vertical.
2:39
I just do a little hot. Tall.
2:42
Little hot. No, that's true.
2:43
I'm very tall. I could probably reach about the
2:45
second floor just from jumping. Oh.
2:47
God, that's good stuff. Quality content.
2:51
Let's hope, Alex, let's hope everyone already knows who's
2:53
listening to that. Oxide successfully completed it
2:57
or we have to come back and delete this.
2:59
You know what? This is real life, okay?
3:02
People die. Yeah.
3:03
Hopefully he doesn't. All right, let's get into the
3:05
episode. Explain it like I'm 5.
3:13
Are you 5 and a podcast listener?
3:15
Well, you're in the right place because this is where we talk
3:18
about the the topics that are really meaningful to you.
3:20
All right, what are what are what are these five year olds
3:22
really want to hear about today, Jen?
3:23
Yeah, let's get into the nitty gritty, financial advisors.
3:27
When is it time to see one? How do I find one?
3:30
What should I be looking for? What's my checklist?
3:32
Oh my God, this should be explained like I'm writing APHD
3:36
thesis because the more I learn about this topic, the more just
3:40
insane it gets. And you know, I'm just going to
3:43
spoil it. 5 year olds go back to blippy, you know, just just turn
3:47
this one off. It's no, it's no fun at all, but
3:50
I'll but I'll get to so, you know, in the world of comments,
3:54
pop culture, talking to friends, media, whatever, it's just so
3:58
easy to fling out this device. Talk to a financial advisor.
4:01
In fact, I was just watching this very funny, like satire
4:06
parenting channel and they they were like answering common,
4:10
common parenting questions or medical questions.
4:13
And like every single answer was talk to your pediatrician.
4:15
It was like completely and utterly unhelpful.
4:17
It's like talk to your pediatrician.
4:19
It's like, yeah, no shit. But like, you know, since I'm
4:22
not talking to my pediatrician, can you give me some
4:24
information? And so I feel like it's the same
4:25
for financial advisors. Like talk to financial.
4:27
OK, OK, just like, but then, then it's it's as though that's
4:32
just like obvious easy thing to do, but it's not pediatricians.
4:35
Maybe it's a little bit easier. Obviously, like I'm not going to
4:38
get like navigating the medical system in the US, which can be
4:40
very challenging. But financial advisors is, is
4:43
has its own set of challenges. So first, I think the important
4:46
thing to know is the difference between a financial advisor and
4:50
A/C PA. A/C PA is a certified public
4:52
account. It's basically someone whose
4:55
primary focus for most individuals is tax preparation
5:00
and helping you with your accounting and your filing and
5:04
preparing and submitting of your taxes.
5:07
And for most people, when you're young, you don't need ACPA or a
5:11
financial advisor. And as your tax situation is
5:13
more complex, you need ACPA. But if you go to a financial
5:18
advisor and say, hey, will you file my taxes, Most of them will
5:22
say that's not what I do. Likewise, if you go to your CPA
5:26
or your tax account and say, hey, what should I invest in,
5:30
they will likely say or maybe legally obligated to say that's
5:34
not what I do. And so when we're talking about
5:37
like licensed, registered financial advisors, we're
5:39
usually talking about investment advisors.
5:41
These are people who help with the investing world and there's
5:44
some overlap and there's also some gaps.
5:47
You know, things like budgeting and things like that would fall
5:50
more under a financial advisor, but it's not really what they're
5:52
licensing. You don't even need to be
5:54
licensed to help someone with budgeting, but you could go to a
5:57
financial advisor who might just know how to do that and help you
5:59
with that. So that's point of confusion.
6:01
Number one point #2 before you talk to a financial advisor, I
6:05
think you need to educate yourself.
6:08
If you don't know even the basics, if you even watched like
6:11
the 30 minute YouTube video on intro to Intro to Investing, you
6:16
are just making yourself a lamb for the slaughter.
6:19
There's no way to know if you're talking to a good financial
6:23
advisor or a bad one. And unfortunately, in this world
6:26
of financial advisors, I'm going to get to it a bit in a second.
6:29
But there's like this massive mess of people who are
6:33
commissioned salespeople who are maybe super nice and gregarious
6:37
and, and fun and friendly and give you a gift or whatever.
6:42
And you seem to really know what they're talking about and they
6:45
don't actually have your best interest in their mind at all.
6:47
They're trying to sell you something.
6:49
And if you don't know the first thing about investing, then
6:53
you're probably going to get end up in one of their offices and
6:56
maybe get burned. So I'd say if you are just like,
7:00
oh, this is also confusing. Start with reading a book intro
7:04
investing, going to YouTube look up investing.
7:06
We have a start here video series.
7:08
If you go to personalfinanceclub.com run the
7:10
homepage first button says start here.
7:12
It's 10-5 minute videos. It's just like what do you
7:15
actually do with the basics? Oh my God, Jen what is happening
7:18
over there? I.
7:19
Just went like this. I have no idea how that
7:23
happened. It did again if you are
7:27
listening without watching on Jenna camera, she just had like
7:32
twice in a laser light show. I for a year battled with making
7:36
like inadvertent hand motions and my screen doing like crazy.
7:40
And in fact it cause like I this fancy DSLR camera, I used to
7:44
record videos and it would cause the camera to crash and I'd have
7:47
to like leave the zoom and come back out.
7:49
And so I and I didn't know just like, do do you actually know
7:51
how that just happened? Well, I you, you were plugging
7:54
the site. So I was like, yeah, rock on.
7:56
And then but I know that sometimes thumbs up does stuff,
8:00
but like I guess it's an Apple thing.
8:02
Right, so Jen's screened some crazy to those listening to the
8:07
car. Yeah, but now she can't do get
8:09
to repeat. OK, let's get back.
8:10
Anyway, personal finance at club.com.
8:12
You're plugging the website in the miniseries, yes?
8:15
Right, so educate yourself because if you walk into a
8:17
financial advisor office and haven't even done the first
8:20
thing you're going to, it might do more harm than good even.
8:23
And so I'm sorry, I apologize for the state of the world, but
8:27
you got to do a little bit of horn.
8:28
But it could be like watching this video series for an hour,
8:31
right? Point #3 to know you don't need
8:34
a financial advisor to invest even in this year 2026 Lord Lord
8:38
of year of our Lord 2026. I see people on the tweet, the
8:42
tweeter on the threads. I'm trying to make my out.
8:45
Jen is just recoiling in horror as I misuse Internet slang.
8:50
You're. Like the most internetty person
8:52
you know. Exactly, that's the joke.
8:54
I built the googles. So I know how the.
8:57
Googles work, you know, I see people on on on now X or threads
9:02
or whatever and they're like, can someone give me a good
9:04
financial advisor? I want to start investing and
9:06
I'm like, yo-yo yo, you do not need a financial advisor to
9:09
start investing. In fact, you're probably worse
9:11
off trying to find one. You know, you can literally go
9:15
get an app like Robin Hood and then buy some stocks with it.
9:19
You know, I don't recommend Robin Hood obviously if you know
9:22
the show, but like a better, a better beginners option might be
9:26
something like Betterment or Wealthfront.
9:28
They're really simple apps, even like Acorns.
9:30
There's a bunch of these apps that are really easy to use that
9:32
are totally legit investing like very good investing and you can
9:36
just put your money in. It just doesn't.
9:37
And if you're like in the less than $50,000 invested range,
9:41
you're investing is so dramatically much more about how
9:46
much you put in then how good you are at investing that how
9:49
good you are investing is most meaningless.
9:51
Like to get to your $50,000, you just need to put more money in.
9:54
And so if you're putting in wealth fund or putting in
9:56
betterment, putting in acorns, that's what's most important
9:59
early on, not about picking the right stocks or anything.
10:01
You know, it's just about putting money in.
10:03
So you don't need a financial advisor to get started.
10:06
And, and going back to point to like educate yourself first,
10:08
learn how to get started on your own.
10:10
I think you'll be you'll get more out of a financial advisor.
10:13
If you walk in say hey, I've got 25,000, I've got 50,000, I've
10:17
got 75,000. This is what I'm doing now I
10:19
know what questions to ask now I know what I'm trying to do.
10:22
If you walk into a financial advisor being like, hey, I have
10:24
$100 a month, what do I do? They're going to just be holding
10:27
your hand like reading like baby's first book on investing
10:31
when like you could read that on your own.
10:32
You know, no disrespect to babies.
10:36
All right, .4 this is, this is like the most non 5 year old
10:41
explained like I'm five ever .4 A financial advisor will not
10:45
magically get you above market returns.
10:48
I think this is like a myth and I and I think it's becoming a
10:52
more outdated myth, but not gone.
10:55
A financial advisor. I, I remember like distinctly
10:57
sitting in a cab in my 20s talking to a friend of mine and
11:00
she worked for a financial advisor and I, I didn't know
11:05
anything back then. I knew nothing.
11:06
I was 25 as a total idiot. And I, and I was asking like,
11:09
how does, how do you make, like, how does he make money being a
11:10
financial advisor? And we were, and she was like,
11:13
oh, he takes a percent of all the assets that he manages on
11:17
behalf of people. So all these rich people give
11:19
him their money. He takes a percent per year from
11:22
everyone. And then with the remaining 99%
11:24
he invests. And I said something like,
11:27
doesn't that hurt? You know, maybe I was a little
11:29
bit precocious back then, even as a cheap little 25 year old
11:33
buzz like, doesn't that hurt their gains?
11:34
And she said no, because my boss is such a brilliant investor,
11:39
dude. He, you know, he gets a 13%
11:42
return compared to the S&P 5 hundreds, 10% return.
11:46
So therefore even net of the 1% fee, his his investors from
11:52
their perspective are getting 12% instead of 10%.
11:54
Now hold up, hold up, hold up. Was she lying or misinformed?
11:59
She was not. She was not lying.
12:01
She was repeating the sales pitch that he gave the
12:04
investors, but you know, only because you're the coast of the
12:08
personal finance club show. Do alarm bells go off and be
12:11
like, wait a minute, this guy just magically gets better
12:14
returns every year. You know, and because you know,
12:17
Jen, the answer is he doesn't. That's not true.
12:20
Financial advisors don't magically get better than market
12:23
returns like study after study after study after study.
12:26
So if you are paying your advisor 1% per year and your
12:29
expectation or your hope is they're going to pay for theirs
12:32
themselves back through better returns, that's not going to
12:35
happen. And that's not what they do.
12:37
That's not how it works. You know, any individual advisor
12:40
wearing a suit and tie sitting in his computer can't take your
12:43
money and match to get better returns than the return of the
12:46
total stock market. It's just not how it works.
12:48
Of course, you know, we don't need to get the whole thing.
12:50
People can short term sometimes get lucky and beat the market
12:52
over short periods of time. But don't do don't pay a fee
12:54
expecting to get better returns. That's not what a financial
12:57
advisor does. So you know, what does a
12:59
financial advisor do? They can answer questions for
13:01
you about your plans so they can look at portfolio review.
13:04
So for example, if you are that who started got to $50,000 and
13:08
said am I buying the right things now, they can look at
13:10
that and answer your question, see if you are making mistakes.
13:14
They can answer questions like am I attract to retire that are
13:17
more complicated and include things like Social Security and
13:21
pensions and insurance and cost of living changes and inflation.
13:24
All these moving pieces, you know the date you retire and and
13:27
other sources of income that maybe is a complex enough for
13:31
you not to feel confident on your own.
13:33
A financial planner can help with that.
13:36
They can help with investing tax topics.
13:38
While they won't be following your taxes, they can help with
13:40
things like, hey, should I be doing Roth conversions this
13:43
year? What should I do with this
13:45
inherited IRA? You know, should I be selling
13:47
some of my gains? Should I be doing tax loss
13:49
harvesting? You know, investment or tax
13:51
return or tax topics as they relate to investing generally,
13:55
they can do an insurance review. Do you have enough life
13:57
insurance for estate planning? We talked about estate planning
14:00
a lot. Basically a plan to get your
14:02
assets to your kids, your beneficiaries or your, you know,
14:06
charities upon your death. They can help with that and they
14:09
can help answer the question, what am I missing?
14:11
You know, a lot of times even, you know, even me who does this
14:15
kind of for a living, I would probably benefit from having a
14:18
financial advisor just like have an expert set a second set of
14:21
eyes. And you know, at my scale, I've
14:22
got, you know, 6,000,000 bucks or so net worth between real
14:25
estate, different investments, you know, cash, all this stuff.
14:29
You're having an expert set of eyes paying them 500 bucks or
14:32
1000 bucks or whatever could easily save me that much just
14:36
because if they catch a mistake I don't know about.
14:38
And so that's the kind of things that you should be thinking
14:40
about. What can a financial advisor do
14:42
for me? Not they're going to beat the S
14:44
and P500500 for me because they're not OK.
14:48
That was like The Big Lead in chance, just like over here.
14:53
I'm on the edge of my seat. On the edge of my seat.
14:55
OK, so when you, you know, you asked how do I find one?
14:59
What should I be looking for? It's very, you know, I can't
15:03
just tell you how to find a good financial advisor.
15:05
It a lot of it has to do with their expertise, with their
15:08
personality, how much, how well they mesh with you.
15:11
But what I will say is it's really, really important to know
15:14
how they make money. If you're looking for one thing,
15:18
it's look for that. And because financial advisors
15:20
make money in one of three main ways.
15:22
Number one is Commission based financial advisors.
15:25
This is also time more officially called fee based and
15:29
these fee words are so confusing.
15:31
Everyone gets confused by them and so I'm going to try to make
15:33
it clear. Fee based means they charge
15:37
commissions. They get a piece of the action
15:40
when they convince you to do something.
15:42
Not to be confused with the very similar sounding fee, only these
15:47
are the stupidest terms. Like the the whole financial
15:50
advisor industry needs a new marketing person, but fee based
15:53
and fee only are kind of opposites.
15:55
Fee based means they get commissions.
15:58
Fee only means they don't get commissions.
16:00
OK, so fee based means if I walk into a fee based financial
16:04
advisor, someone who gets some commissions, they're going to
16:06
sit me down and they're going to see me as like a plump chicken
16:10
who's right for the pluck. And they're going to say, have
16:15
you thought about your life insurance?
16:17
And I'm going to say they're going to say, well, you can
16:20
borrow against the cash value. I'm just like, and because they
16:24
only make money if I buy the things that they're selling or
16:27
the things for which they get a Commission for, whether it's
16:30
investments, insurance, whatever it is.
16:32
And it's such a massive, mind blowing, dizzying conflict of
16:36
interest that someone whose job is to help you with money makes
16:40
money based on what they convinced you to buy.
16:42
Like it's like the most like orthogonal or you know, not even
16:46
orthogonal. I threw that in just for you.
16:48
She hates that word. It's the most direct conflict of
16:51
interest. It's like 2 arrows, you know,
16:53
where they have the exact opposite interest of you, right.
16:57
And in other countries, I think in the UK, it's not even legal.
16:59
They're not allowed to earn commissions because it's such a
17:00
conflict of interest. They're smarter.
17:03
And so and how do you tell if a advisor is Commission based?
17:07
You ask this question, how do you make money?
17:11
If they say, oh, the advice is free or my company pays me or we
17:16
make money when you make money or you know, our interests are
17:20
in line or anything like that. Like if they talk around it, in
17:24
my opinion, that's a bold faced lie.
17:26
What they mean is I make Commission from selling you
17:29
products, but they can't say because it's so offensive
17:31
sounding. So if they can't answer that
17:33
clearly, run, don't walk out of there.
17:35
There's there's no reason to do business with someone who can't
17:38
answer the question. How do you make money?
17:40
Right? And I've heard all those things
17:41
like, oh, my company pays like come on, jerk.
17:43
I'm not asking who, like where is your W2 getting sent from?
17:47
I'm asking how are you making money from me?
17:48
So I hate when they talk about my question.
17:50
OK, that's way #1 Commission based financial advisors.
17:54
Way #2 is AUM or fee only financial advisors.
17:59
Again, way #1 fee based way #2 fee only.
18:02
Fee only means they charge you directly a fee, but that's the
18:06
only way they make money, which is they don't earn commissions,
18:09
they don't have sales, which is they don't, they don't sell
18:11
products. And this is dramatically better,
18:15
but how most of the fee only financial advisors make money is
18:19
by charging an AUM fee, which it stands for assets under
18:22
management, which is exactly how that financial advisor I learned
18:26
about for my friend's job made money.
18:29
He says, hey, I'm going to charge you 1% of everything you
18:31
give me per year. So if you give me $1,000,000,
18:34
I'm taking $10,000 per year putting in my pocket and with
18:37
the other hundred 990,000 I'm going to invest it for you.
18:40
And remember when I went through that list of things that
18:43
financial advisors can do for you?
18:44
Am I attract to retire tax topics, insurance review?
18:47
What am I missing? Very little of the job of a
18:50
financial advisor is clicking by on the few funds you should be
18:54
investing in. In fact, I was in a financial
18:57
advisor, you know, meet up zoom meeting thing.
19:00
There's about 50 advisors on the call the other day and the, the
19:04
host asked how much time per year do you spend managing the
19:09
assets of your clients, Like actually doing the asset
19:14
management, the AUM fee assets under management, right.
19:17
And the average answer was like 10 minutes because clicking
19:21
trade on a website takes 2 seconds.
19:23
And maybe you do it four times a year for, you know, a client or
19:26
whatever takes very little time. And so it's, it's very, you
19:30
know, and, and the AUM advisors will say, yeah, of course that's
19:34
true. But complexity scales pretty
19:37
closely with asset size. You know, someone who's got
19:40
$100,000 probably is a much simpler situation.
19:43
Someone who has $10 million, we got to make a living in some
19:45
way. This is a way to kind of like
19:47
align our interests and make it elastic and make, you know,
19:51
align it with the clients willing to pay for it,
19:52
willingness to pay for it or ability to pay for it.
19:55
And that's all true, but I don't love the AUM feed because 1 it
20:00
gets very expensive if you have. $1,000,000 it's $10,000 a year.
20:05
If you have $10 million, it's $100,000 a year.
20:08
And that's all money that's kind of getting drained from the
20:10
growth of your investments, largely invisible to you because
20:14
they take it directly out of your investments instead of you
20:16
having to like pay for with your credit card or write a check.
20:19
And so over time, it can really hurt the growth of your
20:22
investments and it kind of creates this weird conflict of
20:24
interest where they don't really have an interest in helping, you
20:28
know, when you can retire, they really have an interest in you.
20:31
Maybe keep working to put more money in so they can get a
20:33
bigger 1% of a bigger amount of money.
20:36
And their only interest is really keeping your assets under
20:40
management. I know this is a very long
20:41
answer, but this is like what I do with my life.
20:43
So I'm passionate about it. OK, So it's way #2 way #1
20:47
Commission based. I would say always avoid way #2
20:50
is AUM way better? But it might not be right for
20:53
your situation. I'd say it's often better for
20:55
older people. That 1% kind of makes a less of
20:58
a big difference if you don't have 50 years of investing in
21:01
front of you and the AUM investors or sorry, the AUM
21:04
advisors will only really work with you if you have at least
21:09
six figures. Some people sometimes you know
21:11
well into the seven figures. I know a few advisors who won't
21:15
talk to you unless you have $2,000,000.
21:16
They don't even want to work with you.
21:18
You have a quarter $1,000,000. And so if you have $50,000 and
21:21
you want to go pay 1% per year, they're going to, you know, be
21:24
very nice to you and then kick you out the door.
21:27
All right. And then the third way is what I
21:29
call a flat fee financial advisor.
21:32
So fee based means they charge you Commission.
21:35
Fee only means they don't charge you Commission, but they
21:37
probably charge you an AUM fee. And then the last way is flat
21:40
fee. Flat fee means if you go to a
21:42
financial advisor and ask them, how do I pay or can I pay you
21:46
with a credit card, Flat fee advisors will answer yes.
21:50
Everyone else will answer no. The AUM advisors will usually be
21:54
very transparent, say, hey, I charge 1% of your assets, it's
21:57
worth it because I help you avoid mistakes and provide
21:59
planning and yada, yada, yada. That may all be true, but the
22:02
flat fee advisors are even simpler.
22:04
They say, hey, it's by the hour or by the project.
22:06
You can pay at the credit card. You can see the pricing on the
22:08
website. It's how you pay for almost
22:10
everything else in your life except for maybe, you know,
22:12
medical care and things like that.
22:14
And so you can, it's very transparent and in my opinion
22:17
has the least conflict of interest because they're not
22:21
trying to get your assets under management and keep them there.
22:23
They're not trying to sell you anything.
22:25
They're just trying to give you good advice based on their
22:27
expertise. Does it mean they're an
22:29
excellent financial advisor? Of course not.
22:31
Are some of the AUM advisors excellent?
22:33
Absolutely. But I think in knowing how they
22:35
make money is critical when deciding.
22:38
And of course, if you know me, you know what I'm about the
22:41
pitch I'm about to give. I gave that whole rundown a
22:43
pitch for years when people asked me, but Jen just asked,
22:46
you know, should I see a financial advisor?
22:49
Which one should I see? I gave him this pitch and
22:52
usually what they'd say is, Oh yeah, the flat feed.
22:54
That's what I want. I want a flat feed visor.
22:56
How do I find one of those in My answer was always, I have no
23:00
idea. They're very hard to find.
23:01
There's a few. They're very busy.
23:03
It's a very fractured market. And so couple years ago, VV
23:08
Shane and I, my two former Pfc employees, friends, Co founders,
23:13
started Nectarine, which is a flat fee financial advisor
23:17
marketplace. So if you think you're ready for
23:20
a financial advisor, you've done, you know, you've gotten
23:23
your education, you want to ask some specific questions, you can
23:25
go to hellonectarine.com, see everyone's prices, sort by
23:29
reviews, sort by availability. You can book an hour at a time.
23:34
You can book a plan, or you can book a ongoing relationship with
23:37
a dedicated advisor who's going to have your back always.
23:40
And I think, you know, I think it's the right thing to do,
23:42
which is why I love doing it. Woo I.
23:43
Know Jenna's just she's got a little.
23:47
This is we should end the episode here and just be like
23:49
this is the episode. She's got toothpicks keeping her
23:51
eyes open. No, no, that was a really great
23:56
answer, very thorough. And if you're listening to this
23:58
podcast, then you want a thorough answer, so we make no
24:01
apologies here. I listen to this podcast on my
24:04
commute and it seems to go pretty fast.
24:05
I feel like when I originally dreamed of this podcast, I said
24:08
let's keep it to 20 minutes. So it's really punchy.
24:11
But I don't know. As long as we're having fun, I
24:12
think the longer episodes are fine.
24:14
I listen to this podcast because it's my job and it still goes by
24:17
fast. This.
24:18
Is my job. You don't like it?
24:23
I hate listening to myself talking.
24:24
I'm just kidding. OK, let's move on to our next
24:27
segment. Can I ask a dumb one?
24:32
Yes, you can. Is it a dumb person?
24:35
No, it's a dumb. It's a dumb answerer.
24:37
Well, after that answer, you're definitely not the dumb 10, no.
24:40
OK. The insurance salesman listening
24:42
think I'm really dumb. I promise all those all those
24:44
Commission based insurance salesman were just very mad at
24:47
me about that previous answer because they like earning the
24:49
commissions and they have a whole list of reasons why I'm
24:51
wrong. Money, money, money, money.
24:54
OK. We have a question from Sandy in
24:56
Long Beach. She asked, Hi, I have a Roth IRA
24:59
with Vanguard. However, my current employer
25:01
also provides A Roth contribution plan.
25:05
Is it best to open a Roth account with my employer or keep
25:08
my Roth IRA with Vanguard? Should I merge them together if
25:11
I do open a Roth with my employer Jeremy?
25:15
Sandy in Long Beach, is that really your name?
25:18
Or are you to Sandy because you live on a beach?
25:21
Is that a character in SpongeBob?
25:24
Sandy pants? I have no idea.
25:26
You're a SpongeBob guy. My kids are still in like the
25:29
blippy age range guys. Are having a blippy count for
25:34
the podcast? Bluey, I know.
25:36
Oh, I love Bluey. Bluey is great.
25:38
Bluey is just like, it's like too good for kids.
25:40
They're like, no, that's like too clever.
25:42
They're like learning life lessons about kindness.
25:44
Right, exactly. Like can you put something dumb
25:46
around back to Blippy? So maybe Sandy's a fake name,
25:51
but regardless, we're going to answer Sandy's question.
25:54
Sandy, Sandy, Sandy from Long Beach.
25:55
So you're asking, OK, your employer has a Roth.
25:57
You have a Roth. Should you do 1?
26:00
Should you both? Should you merge them together?
26:01
And Sandy, my girl, I assume you're a female.
26:05
You have a core misunderstanding here, and I'm going to correct
26:09
it for you. I think you're great.
26:10
By the way, this is an amazing question and it's a classic
26:13
confusion around the word Roth and the, and the, and the reason
26:15
is confusion is a lot of people just throw around the word Roth,
26:17
Roth this, Roth that and you just you, you start to
26:21
misunderstand what Roth is. So I'm going to do a little
26:22
history. This is like we're going to
26:24
break a record, record for the longest winded answers.
26:27
Here we go a little history. Back in the day, there was just
26:32
a brokerage account, a regular old taxable brokerage account.
26:35
And that difference from like a checking account, because in a
26:37
brokerage account you can buy stocks and bonds and mutual
26:40
funds and things like that. Then the government introduced
26:43
the IRA, the individual retirement account.
26:47
That is a way to invest with a tax break.
26:50
So in a regular brokerage account, no tax break.
26:52
But if you put your money inside of an IRA, both are the same
26:55
because you can hold investments in both, but the IRA offers you
26:59
a tax break. Then enter the the four O
27:02
1K/4O3B/457/TSP. These are all different types of
27:09
what you call a contribution plan, basically a employer
27:13
sponsored retirement plan. And that's just essentially
27:17
another account. So you have regular brokerage
27:19
account, IRA4O1K, all those crazy things.
27:23
And Sandy, what you call a Roth contribution plan, I'm going to
27:26
call a four O 1K because that's what most people have.
27:29
That's what most people call it for simplicity.
27:31
So those are the three types of accounts.
27:33
Back in the day, there was a tax break for Iras and four O 1 KS.
27:39
And that tax break was designed to really be deferred income.
27:44
So like let's say you make $100,000 a year and you want to
27:48
save some of that income for retirement.
27:50
So when you quit your job, you can live off the income.
27:52
Then what you can do is you can put the money into your
27:55
contribution plan at your 4-O1K and say hey, I'm going to put
27:58
$20,000 a year into my 4-O1K. When I do that, the government's
28:03
going to tax me as if I only made $80,000 this year.
28:06
That $20,000 goes in tax free. Then when I take it out when I'm
28:11
6559, 1/2 or above, whatever it is, then I pay income tax.
28:16
And then. So you're deferring the income
28:18
tax from now until later. That tax break is called the
28:22
traditional tax break because that's how it started.
28:26
The tax break was meant to defer your income so people could keep
28:28
some of the income for later and take it out then and basically
28:32
use their income later instead of using it now.
28:34
Plus it gets to grow along the way through the investor, which
28:37
is what we always talk about. That is the tax break.
28:40
That's the traditional tax break.
28:41
But in 1997, Jen, you were 11. You remember 97.
28:46
I was 16 or 17 or something, depending on what month of the
28:51
year was. In 1997, I was probably a junior
28:54
in high school, pretty fast kid back then.
28:57
But 1997, the Taxpayer Relief Act of 1997 was passed to
29:03
introduce a different type of tax break for your IRA.
29:08
It introduced the Roth IRA. So you had a Traditional IRA and
29:13
a Roth IRA and a new tax break is that you still pay tax on all
29:19
of your income this year. So let's say you make $100,000.
29:22
You pay tax on all 100,000. But on your post tax money,
29:26
let's say you've got $75,000 leftover after you pay tax and
29:29
you put $5000 into a Roth IRA, that money is never taxed again
29:34
and you don't have to pay tax on withdrawals.
29:37
And so this senator, what was his name something Roth, William
29:41
Roth Senator. It's a dude's last name, some
29:45
white dude from the middle of the country.
29:46
I. Think.
29:47
Yeah, that's why it's called Roth.
29:49
Good old Billy Roth. I think he's no longer with us.
29:53
I'm not sure if he's a senator. He's probably about 100 years
29:55
old in 97, so it should make him 129 today.
29:59
So crying out with us. But he basically said, hey, some
30:05
people would prefer this rather than having this traditional tax
30:07
break. I want the Roth tax break.
30:09
When they did that, it was only for Iras.
30:11
So you could have a Roth IRA or a Traditional IRA or a
30:16
traditional 4-O1K. Then the history lesson
30:20
continues. In 2006, the Pension Protection
30:24
Act of 2006 was passed, introducing the Roth 4-O1K.
30:29
So now it kind of fills out the grid on the top, if you're
30:32
picturing this in your mind while you're driving trying to
30:35
crash. But the top, you know, are the
30:38
horizontal axis, you've got accounts IRA versus 4-O1K, and
30:43
then the vertical axis or along the side you've got tax or tax
30:46
breaks, traditional and Roth. So now all four squares exist,
30:50
Traditional IRA, Roth IRA, traditional 4-O1K, Roth 4-O1K.
30:55
And so now, now this year in 2026, basically, they're all
30:59
very, very common. You can add either.
31:01
And so back to sandy pants from SpongeBob in a, in, in a
31:08
pineapple under the sea. She's sandy because she's on the
31:10
Long Beach up there just two hours north of us here in San
31:13
Diego. You're not in San Diego.
31:14
You're you're right in the Long Beach.
31:16
You basically live in Long Beach because you live.
31:18
In Sandy Cheeks is SpongeBob, but I don't like we should call
31:20
her that. Sandy Cheeks This just this.
31:23
We have to change the rating from PG to PG 30.
31:26
Ratings on podcast I didn't know.
31:29
That. We.
31:32
Need to reach out to the Podcast Rating Association to make some
31:36
serious apologies. So back to Sandy's question.
31:39
She's misunderstanding this grid I just described.
31:42
She's saying, she's saying that my employer has a Roth and I
31:45
have a Roth. But no, no, no, your employer
31:46
has a Roth 4-O1K and probably a traditional 4-O1K2.
31:50
You can probably choose and you have a Roth IRA.
31:53
And so should you have both. And the answer is yes, they both
31:56
have different contribution limits.
31:58
Four O 1 KS, you can contribute, contribute.
32:02
I should know, I should know how to say that word by now.
32:04
For four O 1K, you can contribute $24,500 in 2026.
32:10
In an IRA, either flavor, Roth or traditional, you can
32:13
contribute 7500. So by having both you can
32:17
contribute more total money and you know, most people do have
32:21
both. You know, our checklist order of
32:23
operations is you do the four O 1K up to your match 1st and then
32:27
you do the Roth IRA optimizing for match and optimizing for the
32:31
lower fees which you usually get inside of a Roth IRA.
32:34
So it's your answer. Yeah, you should probably keep
32:36
both have your company's Roth contribution plan as you call or
32:41
Roth. I bet it's probably a four or
32:42
three or something like that. Don't know what Sandy pants job
32:44
is. She works in the pineapple under
32:46
the sea. So what does Sandy do on the
32:50
job? Don't they have like this?
32:51
I've only seen my episodes of SpongeBob.
32:53
I shouldn't even brought it. Up doing a lot of SpongeBob.
32:56
I don't know. I know a Krusty Krabs.
32:57
The only job I know 'cause he got a restaurant.
33:00
Mr. Krabs. Krusty the Clown.
33:03
No, no, Mr. Krabs owns Krusty Krab, and he's the only one that
33:06
I know that has a job on that show.
33:08
I think you're downplaying how much you know about SpongeBob.
33:11
SpongeBob, SpongeBob. I can't even say it right.
33:16
So whatever, whatever Sandy's job is down in her pineapple
33:19
under the sea, she probably has a four O 3B.
33:22
I'm guessing because that's probably more likely to be
33:23
called a contribution plan, but it's all kind of same stuff.
33:26
But yeah, keep both. And should you?
33:28
She asked should I merge them? And the answer is you can't
33:30
merge them just by law. You can't merge an IRA into a
33:33
four O 3B. And by law, while you're working
33:35
there, you can't do a big or you can't do a big conversion or
33:39
transfer out or roll over out. When you leave your job sandy
33:42
and you move above the sea back to the beach and get sandy
33:46
again, you can roll over your old Roth 4-O1K into your Roth
33:51
IRA if you want. But when you do that, you might
33:53
have both because all matches always traditional.
33:56
And So what often happens when people roll over an old 4-O1K or
33:59
4-O3B, they end up with kind of two checks.
34:02
One goes into a rollover IRA, which is a traditional, and one
34:05
goes into the Roth IRA. And so that's my answer.
34:08
You're kind of confusing this, this grid of the account types
34:12
versus the tax break types. And you can definitely have both
34:17
and you should have both, but don't call a Roth anymore.
34:20
It's not a Roth called a 41K or an IRA.
34:23
And if someone says which tax break are you taking inside of
34:27
your IRA, then you could say the Roth break, the Roth tax break
34:31
thanks to Senator William Roth back in 1997.
34:35
That's what she'll say. Thank you, Sandy, for your
34:38
question. Thank you, Jeremy for your
34:40
answer. Let's get into our next segment,
34:47
Scroll Patrol. Scroll Patrol.
34:50
I find videos from the Internet. I make Jeremy watch them.
34:54
I make him react in real time. He has no chance to prepare.
34:59
So we're going to click on this video.
35:02
He's already laughing. No, I'm not.
35:04
I'm not laughing. OK this video together.
35:06
You don't need a job anymore 50. Grand a month is about to be
35:09
your new normal. You might think I'm joking, but
35:12
you're going to believe me when I tell you one of the biggest
35:15
secrets wealthy people have been gatekeeping from you for years.
35:19
You know what a trust fund is, right?
35:21
Well, when you think of a trust fund, you probably think of
35:23
wealthy people using it to protect their assets so they can
35:26
pass them down to their kids. Sure, but what most people don't
35:29
even realize, what they realize is that it's not only the
35:32
wealthy who open trust funds. People who are broke also open
35:36
trust funds, and they actually use them to become wealthy.
35:39
You know, you're probably wondering.
35:41
Well, how do they do it? Yeah, well.
35:43
So to make sure you save this video and bookmark it, Oh, I'll
35:46
like and subscribe. To it later gonna say open up a.
35:48
Trust, which anybody can do, and then you buy an asset to put
35:52
inside of it. And if you're thinking, well,
35:54
shit, I don't have an asset, I don't have an asset, here's what
35:56
people do in that. Case they go.
35:58
Out and they buy a life insurance Oh, they buy life
36:01
insurance policies inside of. The trust fund.
36:03
Life insurance. Policies are inexpensive and
36:05
accessible to almost anyone. You can get $1,000,000 policy
36:08
for around 100 to $200 a month and if you buy that policy and
36:12
put it inside of your trust, the trust now has a value.
36:16
At a million. Dollars and you trust something
36:18
the ultra. Rich do all the time you.
36:19
Twirl against your asset. People like Elon Musk and Jeff
36:23
Bezos don't get the billions in a bank account.
36:25
Their wealth is tied to their stock.
36:28
So when they need money, they go to the bank, they borrow against
36:31
their stock and they use it as collateral.
36:33
And you can do the exact same thing, just like Jeff Bezos.
36:36
Because your life insurance policy is.
36:38
Inside the trust and you can borrow against its value.
36:42
And what do smart people do when they borrow money?
36:44
Well, they invest. They buy businesses, they buy
36:47
small franchises, they partner with other investors and
36:50
purchase a apartment buildings and commercial real estate.
36:53
And once those investments start producing profit, they use that
36:57
profit to pay off the loan they use to acquire the assets.
37:01
And once that debt is gone, the businesses don't just disappear,
37:05
they keep the cash flowing. At that point, you're
37:08
financially free and you actually start building
37:10
generational wealth for your family.
37:12
And this is just one. Way people become wealthy.
37:15
That most of us never hear about.
37:17
Another way is flipping virtual real estate.
37:19
Yes, digital assets. You can acquire virtual real
37:22
estate for as little as $7.00 and flip it for $200 or more in
37:27
about 15 to 20 minutes a day. And you don't need to post
37:30
content or show your face. This is a brand new trend that
37:33
leverages AI and one of the easiest ways to make money
37:36
online right now. If you want to learn how to do
37:39
this, just click on my profile, check out the link at the very
37:42
top of my bio, and I promise you, once you look at it, you
37:45
are going to thank me later. My.
37:48
God, Jen. My.
37:54
God, I hope, I hope my reaction synced up with the video for
37:58
that because I know I was talking over him a lot, but my
38:01
God. So Full disclosure, I cheated,
38:05
I'm a cheater, I'm a liar, I'm a fraud.
38:07
What happened to that integrity? 0 integrity.
38:11
And now I'm in good company with someone else with 0 integrity
38:13
but like my God, we have to talk about this video.
38:17
But yeah, I sent this video too because I was having multiple
38:20
people send this to me and they're like wait wait, how do I
38:22
do this? So to summarize, you're broke,
38:28
meaning you have $0.00, you go open a trust, which by the way
38:32
like this whole video is just like going to chat sheet PT and
38:36
saying can you make me an AI slop video of the all these
38:40
confusing financial terms, put them into one nonsensical stream
38:43
of insanity and then market it as a $50,000 a month income
38:48
stream. Like it was just, it was the
38:50
craziest everything I've ever watched.
38:52
And this video on social media has like 30,000 likes or
38:56
something. People are like like buying into
39:01
this. So just to like recap, if you
39:03
want $50,000 a month and you're broke, what you do is you open
39:07
up a trust, which is just an empty old, you know, entity in
39:11
which you can hold things. So if I, you know, and a trust
39:14
is nothing, people like hear the word trust, like, oh, trust for
39:16
millions of dollars. No, no, it's nothing.
39:17
It's just like an empty bucket. It's like you have a bucket of
39:21
your own name. And so I can put things in my
39:23
own bucket or I can make a bucket of a different name
39:25
called a trust and I can put myself in that bucket.
39:26
So it's just a different bucket you can put stuff in.
39:28
Other than that, it does almost nothing other than basically
39:31
help control who owns that bucket.
39:34
So you get an empty bucket. Then you buy a life insurance
39:37
policy of course life insurance for $100 a month and then your
39:40
bucket is worth $1,000,000. Then you walk to the bank with
39:44
your trust bucket with $1,000,000 life insurance policy
39:47
and say hey give me $1,000,000 in cash, I'm good for it.
39:51
See I've got you know, 5 minutes ago I was broke with $100 life,
39:54
$100 month life insurance policy.
39:56
But give me $1,000,000 then I'm going to buy a business.
40:00
And you know, for my $1,000,000, and that's going to pay down the
40:04
debt and then it's the debt's going to be gone.
40:06
Then I'm going to have this business that's going to be
40:07
paying me $50,000 a month. How great.
40:09
And then like, we just tricked, like transformed into a
40:14
different stratosphere. You take $7.00.
40:17
I don't know where the hell Simon came from to buy a digital
40:20
asset. Then you use AI somehow.
40:23
Like I literally don't even know what the hell this guy's talking
40:26
about because he has a link. You can sign up.
40:29
I'm sure he does. I actually should go to that.
40:31
I like clicking on these scammers links and like just
40:33
going through the insanity. But you know, put your $7.15
40:36
minutes then you have AI, you have $200.00.
40:39
Of course, of course everyone can.
40:40
What's that? I'm going to do the hold on, I'm
40:41
going to do the math real quick. I can't do this.
40:43
I define my 7 * 200 divided by 7 is Oh yeah, you just 28 X your
40:48
money in 15 minutes. Jen, it's that easy.
40:51
If I could 28 my I've got $6 million, I can just go buy
40:54
instead of $7.00, I'm going to buy $6 million worth and
40:57
multiply by 28 and then I'll have $168,000,000.
41:01
And guess what? If I do it once more, you know,
41:04
I'm maybe a little bit tired of it took 15 minutes.
41:06
I'm going to do it once more. It's going to take me a whole
41:08
half hour. We'll call it one SpongeBob
41:11
episode worth. I'll have $4.7 billion.
41:15
So based on this guy's AI strategy of buying digital
41:19
assets from 7 to $200, I can, I can get to $4.7 billion.
41:24
One sandy pants SpongeBob. You know, this is the stupidest
41:28
thing. I, I, I don't really like to
41:30
make sweeping statements, but I think this is the stupidest
41:33
thing I've ever seen. Let me tell you how this is
41:35
going to go. I'm broke.
41:39
Go open a trust. Sure.
41:41
Trust our legal documents. How you open a trust?
41:43
You can go to a lawyer probably get to do it for you.
41:45
If you find a cheap lawyer for 1000 bucks maybe 2000, you can
41:48
do them. You can do them online.
41:50
Maybe get an online trust for maybe in the 500 to $1000 range.
41:54
OK now I'm $500 low. All right now I'm going to go
41:56
get a life insurance policy for $1,000,000 policy for $100 a
42:00
month. That might track if it's a term
42:02
policy. If you're trying to get
42:04
$1,000,000 death benefit and have some cash value that you
42:07
can actually borrow against, like he's like he assumes then
42:11
you're not going to get it for $100 a month.
42:13
But like he said, 100 and 200, let's say you can get it.
42:16
You can get a 2 million or $1,000,000 life insurance policy
42:18
for 200, which I don't even believe you can.
42:20
You're going to go buy it, put it inside in the name of your
42:23
trust. Sure.
42:24
So now you have a trust with a life insurance policy named as
42:27
the beneficiary for some reason. Then you're going to waltz into
42:31
the bank. I can't see a bank on my window,
42:34
but I think there's a, there's a Bank of America around the
42:36
corner. I'm going to waltz into the bank
42:38
with my trust document and my insurance policy and say I'd
42:42
like to speak to a banker please about a loan.
42:45
I'm going to sit down and the banker says, oh, you're here by
42:47
the loan. I say, yes, I would like
42:48
$1,000,000 loan because I have this trust with this $1,000,000
42:52
death benefit life insurance inside of it.
42:54
Please loan this to me against my, against this asset.
42:57
Then the banker's going to say are you, what are you, what are
43:05
you talking about? You don't have anything.
43:08
You have nothing. You have a death benefit
43:10
contract and you're alive. You have nothing.
43:13
Your cash value in that policy is 0 today.
43:15
It's going to be if you're paying $200 a month for a death
43:17
benefit, it's going to be 0 for years before there's anything.
43:20
You literally will get laughed. I mean, you know, the, the
43:23
banker's probably not as big of a Dick as I am, but like the
43:25
whole, this whole this guy's created crumbles because you
43:30
can't borrow against this nonsense he just created.
43:33
It's just totally utter nonsense.
43:34
It's just like literal AI, like what's the word AI slop push.
43:41
It might even. I don't know if this is a real
43:42
human or not. I know he has like hundreds of
43:44
thousands of followers, which is like a crime against all, like
43:47
personal finance, honest creators that this guy is
43:50
actually doing well when he creates total and utter trash
43:53
like this. Yeah.
43:55
For he has, almost happily. Followers like maybe he's even
43:57
bigger on TikTok I don't know. But like this is honestly legit
44:00
scam trash. I haven't clicked on his link,
44:02
but anything that this guy is saying or selling or buying, I
44:05
don't know if he knows it or not, but it's like just literal,
44:08
total, utter nonsense. Do not do this.
44:10
I give this an F. We're all stupider for having
44:13
heard of this. Like cue the, you know, Billy
44:17
Madison. That's the stupidest thing I've
44:19
ever heard. You know, famous, you know that
44:21
clip? I think so like.
44:23
What you just said. There's at no point of that.
44:26
You have anything. Yeah.
44:27
It's like the end of Billy. Madison when he's like trying to
44:30
talk about business, business ethics.
44:32
Yeah, at no point to this approach of coherent thought.
44:35
And and that's just the whole like trust life insurance,
44:39
borrow, buy businesses scheme, which is utter nonsense.
44:42
And then it gets it into a worse scam, which is turning $7.00 and
44:46
$200 in 15 minutes with AI through like some crypto scam.
44:50
Do not give this man money like Jacob Hartman official come for
44:54
me if you want because what you just said was awful.
44:57
You're hurting people. Stop it.
44:59
I give you the lowest available score F minus fail.
45:02
Delete your account. I am a nice person, but I cannot
45:05
be nice to you because that sucked.
45:07
Was I unclear, John? I'm worried.
45:09
I'm worried I was too nice. I think I went a little easy on
45:12
him. Tell us how you really.
45:14
Feel. Yeah.
45:16
All right, You have received our first F minus off the pocket.
45:20
Not only will you not make money from that.
45:22
You will lose the money for the trust which you maybe don't.
45:24
If you're broke, you don't need to trust.
45:26
You will lose the money from the life insurance policy.
45:27
You're going to lose the money on this crypto scheme.
45:29
This is not $50,000 of income. This is you're going to get
45:32
taken. It's a scam, taken Liam Neeson.
45:36
All right. That should wrap up that segment
45:39
because you have said all there is to say.
45:41
Let's get into our next segment, Money, Money Jeremy had.
45:47
Time today. Man, do I have time today
45:49
because this. Is a long episode and no this
45:52
one will be maybe medium like what do I have time for tonight
45:55
the time okay so. We're back on your Instagram.
45:58
You posted about the best index fund.
46:01
Why don't you explain the chart that we're seeing and then I'll
46:03
read the comment. Yeah, so very simply, a lot of
46:05
people. Often ask me what is the best
46:07
index fund? I always say buy and hold index
46:11
funds. A very obvious, normal, natural
46:13
question to ask is which one's the best?
46:15
And the answer is there really isn't a best index fund.
46:19
That doesn't really make sense because index funds all kind of
46:22
are designed to do the same thing.
46:23
And so this is a chart of the 12 most popular US index funds.
46:27
They vary by some are mutual funds, some are ETFs, some track
46:30
the S&P 500, some track the total market, some track like
46:32
1000 stocks, like something in between different providers,
46:37
Fidelity, Schwab, Vanguard, BlackRock, you know, State
46:41
Street, you know, as diverse a group of U.S. stock market index
46:45
funds as I can really find at least as as related to like a
46:49
total ish stock market index fund.
46:52
And the chart basically lays them all on top of each other
46:55
saying doesn't matter if you buy VTSX or VOO or SPY or VTi or
47:00
ITOT or IVV or FXAX, all of these are going to perform about
47:05
the same. Don't worry about picking the
47:07
best one. Just pick one that works with
47:09
your brokerage that's low cost and stick with it.
47:12
And then this commenter said FNILX or as I.
47:16
Like to call it FINILX has zero expense ratio and as as good as
47:20
FXAIX which is Fiscax. Jen, just try to say FXA.
47:28
IX How would Yeah, exactly. How would you say that you put
47:31
AZ in there? There's AZ.
47:33
Yeah, Vt. Sax, you can kind of say I tote
47:35
you can kind of say vu spy vu. But these ones, man, these,
47:40
yeah, I thought might be my favorite.
47:44
I thought. I thought, yeah.
47:45
The latest Apple projects. Get some I tots.
47:48
Yeah, the latest Apple project. You get some, you get some.
47:52
I tater tots. Yeah, delicious by the.
47:55
Way. I love me some I tots.
47:57
OK. So I feel like we need to find
47:59
some more mean comments because that one's really nice.
48:01
And you know and this commentary is right, FXAIX, which is one of
48:05
the ones I have on this list has an expense ratio of 0.015% per
48:10
year. Expense ratio means of all the
48:12
money put in the fund, withdrawals to cover their own
48:16
expenses and profit margins and everything 0.015% per year and
48:21
then the rest of it continues to grow for next year.
48:23
FNILXF Nil X has a 0% expense ratio and it's actually was kind
48:29
of a little bit ground breaking because Fidelity released these
48:32
four big index funds that had a 0% expense ratio, the first ones
48:36
in the industry to do it. And there was kind of like race
48:38
to the bottom And they said, let's just go all the way there
48:40
until there's actually one that has a positive expense ratio
48:43
where they pay you for putting the money, which I think might
48:46
technically be possible, I don't know.
48:49
So what's the difference? As shown in the chart, these are
48:53
going to perform nearly identically because they both
48:54
have extraordinarily low expense ratios.
48:57
I say anything under .2 is very, very low and .015 is more than
49:02
10 times lower than the bar for low.
49:04
So it's extraordinarily low. And of course, 0 is 0, but
49:07
they're both close to 0. And so I did a little analysis.
49:11
If you invest $500 a month for 50 years, this is a you know,
49:16
people yell at me when I say 40 years.
49:18
I'm going to go even longer to exaggerate the difference
49:20
between these two, right? Do it for 50 years.
49:22
You do it from 25 to 75. You know, your entire adult life
49:26
essentially, and you're either paying a 0% or 0.015% fee.
49:32
This makes a difference. It's based on a 10% total
49:34
return. So if you get all 10% and don't
49:36
pay any fee after 50 years, you'll have $6,983,451.
49:44
If you're paying the fee, you'll have $6,946,006.00.
49:52
And so Jen, what's the difference between those two
49:55
numbers? You just heard them.
49:56
You heard me say it. What'd you say?
49:58
Was it like 50,000? Actually that's.
50:00
Incredible. Good job, Yeah.
50:01
It's like, you know, I'm just looking, I was like, it's a
50:03
little bit, it's like 37,000. But yeah, it's the fact that you
50:06
got to the right digits pretty incredible.
50:08
But as a percent, it's, it's only half a percent difference.
50:13
And so, and this is 50 years out, everything's perfect, yada,
50:16
yada, yada. And, and half a percent is like
50:19
a slow day in the market swinging.
50:21
If the market goes up or down 1%, that's kind of like a little
50:24
bit of a volatile day. 2 percents, like probably going to
50:26
make news, half percents just like a slow day.
50:29
And so, you know, paying this fee for 50 years and you're like
50:32
one day in the market, it's nothing, right?
50:34
So that's the dollar amount difference is virtually nothing.
50:37
The difference to your life is exactly nothing.
50:40
You're not going to know the difference in 50 years from now.
50:42
It's like, yeah, would you like to have the extra $37,000 when
50:45
you're 75? Sure.
50:47
But so many other things are going on in your life.
50:49
You'd like bought and sold houses.
50:50
You move, you're taking some money out of your bubble, like
50:52
the time in a real $37,000, right?
50:54
This is just like showing the math on the difference it makes,
50:56
which is almost little, which is almost nothing.
50:58
OK, so here we go. So, you know, this comment is
51:01
saying you might as well go with a lower one.
51:02
And my answer is like, should you?
51:04
It's going to make almost no difference.
51:05
All things perfectly equal, Sure, why not go with a lower 1?
51:09
You know, if you pay a little bit less, might as well.
51:11
If it's pennies, why not? But all things, you know, we're
51:15
Jen, I need you to get the nuance cannon out.
51:18
Do you have the do you have the nuance ticker tape parade?
51:21
Well, the kicker is it's very. Quiet, that's all.
51:23
You guys haven't heard it because it's the nuance cannon.
51:26
Do you have the nuance slide? Trombone.
51:28
Do you have the do you have the nuance hydrogen bomb?
51:32
Because here comes all the nuance and before you know any
51:36
time I bring out the nuance can and what I say is it doesn't
51:38
matter. None of this matters.
51:39
Just pick one go with it does not matter.
51:40
Like turn off this podcast, go outside, touch grass, go through
51:43
that doesn't matter. But if you're.
51:45
On a car ride. And you want to hear the end of
51:47
the show, I'll say it. OK, here we go.
51:49
I'm going to break down the difference between these two to
51:52
see how similar they are. Holdings and FXAIX we like FXACS
51:59
is five O 8 holdings in F Nilex is 513.
52:05
Technically FXACS tracks the S&P 500 and technically F Nilex
52:11
tracks a proprietary list of large companies, which is almost
52:15
the exact same companies down to like a small few at the bottom
52:18
right. And so their performance will be
52:21
functionally identical. The expense ratio we already
52:24
talked about tiny difference. The teeny tiny difference even
52:28
even you know, zoomed in over 50 years makes almost, you know, a
52:31
day's trades in the in the market, right net assets.
52:34
That means how much money is in each of these in figs acts the
52:37
higher expense ratio. One, they have $740 billion held
52:42
in this fund currently because it's a lot older.
52:45
In FNLX, it's $16 billion. So there's 46 times more money
52:51
in FIGS Acts than there is in Finilix.
52:55
Some smaller funds run the risk of being shut down.
52:59
What a lot of companies do is they introduce like a whole, a
53:02
whole slew of mutual funds. They see if any of them like get
53:05
any traction, if some of them underperform and don't have any
53:08
investors, they shut them down. And it can force you to realize
53:11
any capital gains. They just say, hey, this fund's
53:15
going away. Here's a tax statement saying
53:17
it's everything got sold and we put you into this other one.
53:21
F Nilex still has $16 billion. I'd say it's that, you know,
53:26
it's relatively new compared to physics.
53:29
It's it's relatively small, but it's still pretty big and pretty
53:32
old compared to a lot of mutual funds.
53:33
I'd say the risk of it closing is around 0 because Fidelity has
53:37
kind of hung their hat on having this zero expense ratio mutual
53:40
fund. Now distributions.
53:43
Distributions are when do you get the money paid out from all
53:47
of the dividends collected inside the fund?
53:49
So both of these funds own 500 stocks in the big stocks, many
53:53
of them probably 3 or 400. So I'm guessing, I didn't look
53:56
that one up, but most of them pay dividends.
53:59
So for example, if you own AT&T every, you know, every month or
54:03
every quarter, whenever they're going to pay you some cash
54:06
deposit directly to your account just for owning the stock,
54:09
that's called a dividend. Some funds that own 500 stocks
54:13
collect all those dividends and then by law in the US, they're
54:16
required to pay those dividends out to you at least once during
54:20
the year. Figs acts pays them out
54:23
quarterly, you know, April, June, September, December.
54:27
At the end of every quarter, they just cut you a check for
54:29
the collected dividends of all those stocks inside F middle X,
54:33
the 0% expense ratio fund pays it out annually.
54:37
The difference has nothing to do with the total growth.
54:41
They'll have the exact same total growth assuming you're
54:44
reinvesting dividends. If you're not reinvesting
54:46
dividends and you're holding the cash out, it might impact a
54:48
little bit 'cause you're getting the cash sooner.
54:49
But assuming you're reinvesting the dividends, you're keeping
54:51
the, you know, you're taking the cash and buying more shares of
54:54
the same thing, the growth will be virtually identical because
54:56
that's what's happening inside the fund.
54:58
They're reinvesting it internally.
55:00
And then the day they pay out the dividend, they, you know,
55:02
they sell, adjust the share price and the dividend gets paid
55:05
out to you. It might have some impact to
55:07
your lifestyle if you are retired and you like getting a
55:10
quarterly check rather than one big one in December just for
55:12
your own personal cash flow reasons.
55:15
That's a little bit of a difference.
55:17
And then the final difference I'll mention is affordability.
55:21
And there's a lot of people are like, oh, you can't transfer F
55:24
double XI. Like really read it carefully.
55:25
I couldn't find it. So what I did is actually went
55:27
to my Vanguard account and I clicked, I opened up, clicked
55:30
trade, clicked buy mutual funds. I typed in figs XFXAIX and it
55:34
lets me trade it for free. It's one of these really popular
55:36
mutual funds that even though it's Vanguard, it lets me trade
55:39
the Fidelity mutual fund for free.
55:41
So no, no by fee, no trade fee. It's not guaranteed for the
55:45
future, but that's what it's doing today.
55:47
And that means if I am unhappy with Fidelity for some reason
55:50
and I transfer my account from Fidelity to Vanguard, I can do
55:55
an in kind transfer. That means it takes the actual
55:58
shares of FXAX and moves them into my Vanguard account.
56:03
That means I don't have to sell anything to move between
56:05
accounts, which is a good thing because it doesn't.
56:07
It's not going to force me to realize a capital gain if I
56:10
don't want to. With F Nilex, the 0% expense
56:13
ratio, Fidelity doesn't allow that.
56:15
They don't allow it to go with any other.
56:18
And I demonstrated that to myself because I went to try to
56:20
buy it in Vanguard and said Nope, not available, can't do
56:23
it. That means if you are with
56:24
Fidelity and you want to transfer your account to
56:26
Vanguard for some reason, F Nilex will have to be sold.
56:30
You have to sell all the shares inside of Fidelity and then just
56:33
wire the cash over to Vanguard. And does that matter?
56:37
You know, you're still a nuanced can territory.
56:40
Are you really going to be, you know, transferring it and, and
56:42
it doesn't matter at all inside of a an IRA, for example,
56:45
because IRA there's no tax impact.
56:47
Maybe, maybe it matters a little bit because you have to deal
56:49
with the hassle of selling it and re buying it on the other
56:51
side. But generally to speak, it
56:53
doesn't matter at all inside of a brokerage account, a taxable
56:56
brokerage account. You would have to sell your
56:58
stock, sell your mutual fund, move it over and then
57:02
potentially realize a gain or a loss, a tax consequence.
57:05
You may not want that. You're not a huge deal.
57:08
This is all kind of like barely moves the needle kind of stuff.
57:11
But they're all like all those things except for the expense
57:13
ratio tilt towards figs acts, you know, more net ashes, more,
57:18
more often distributions, better portability, better trade
57:21
ability on other brokerage websites.
57:24
So we do this commenter saying might as well go with a 0
57:28
percent one. Yeah, maybe.
57:29
You know, I think actually when I invested inside of the
57:34
custodial accounts for my two kids, I chose these zero percent
57:38
expense ratio funds. I was like, yeah, might as well.
57:40
You know, I'm planning to be with Fidelity forever and don't
57:42
really care about distributions because it's all getting
57:44
reinvested. Go nuts.
57:46
But it just doesn't matter. It's all nuanced Canon.
57:49
Just just buy whatever. That's the whole point of this.
57:55
Oh, the nuanced slide whistle. So we have a whole nuanced band.
58:01
Coming, we're getting real musical over.
58:03
Here. OK, so we're team for Sky X.
58:08
Long way to say all that Exactly.
58:12
Social media, I like the podcast because I can go on a rant and
58:14
you're forced to listen because you're in the car and what else
58:16
do you do? Listen to Choose A5?
58:19
Good luck. You've already broken, you've
58:20
already gone through all those episodes, if you're down to
58:24
Jeremy. Sorry, what?
58:28
I speak. What were you saying?
58:30
You're fine. I just love that you think that
58:33
they can't Fast forward no if they're if they're already down
58:36
to our. Podcast.
58:37
They've listened to all the good podcasts.
58:38
They're stuck with us. I say if they're an hour and
58:40
they're probably going to. Just be like, you know what?
58:42
I've made it here. They're like, why is this
58:44
episode an hour? Why did you say it's so
58:46
important? And then they're going to
58:47
realize they got to this point in that episode like, oh,
58:49
nothing. Although he did really yell at
58:50
that one social media guy. So this is the juicy stuff,
58:53
this. Is a great episode, Jeremy.
58:55
Yeah, good. Yes.
58:57
What does it? Feel but the.
58:59
Takeaways in Fidzacs is better than Fidelix.
59:01
It's not like it doesn't matter just one you know even if you if
59:04
you transfer to sell it's not the big of a deal.
59:05
Like the big deal is putting more money in.
59:07
That's the non put more money into either 1 doesn't matter.
59:10
If there's one thing about you is you're consistent.
59:12
Thank you, Jennifer. I'm like a sociopathic robot.
59:17
Not my government, Government. Government.
59:19
Oh. They're going to, they're going
59:20
to be able to look you up now. No one could have connected
59:23
that. Why do they call her Jen?
59:26
Is it short for Genevius? Yeah.
59:28
The amount of people who are like is it?
59:29
Jennifer, I'm like, yeah, most are, shockingly.
59:34
All right, cool. That was a great episode.
59:36
Thank you Jeremy for dropping all of that knowledge.
59:38
This is free, free guys. Crazy.
59:43
Come back next week, we're going to do it again.
59:45
Thank you for listening. Subscribe to Jen's Only Fans,
59:46
that's how. That's how she's going.
59:50
Talking to an older woman this week and she said fans only and
59:53
I lost Andrea exclusively calls the fans only one of.
59:56
My big regrets in life was not registering fansonly.com the day
1:00:00
only fans like came to be. And putting like a drop shipping
1:00:04
site for ceiling fans and, you know, just like all links to
1:00:08
Amazon and just selling fans and just having, I think of a very
1:00:11
lucrative business selling fans on fansonly.com.
1:00:14
The scamming continues. Guys, come back next week.
1:00:17
I'll try and rein Jeremy in. I'm sorry.
1:00:19
Oh my gosh. Never.
1:00:20
It's gonna get. Crazy.
1:00:21
From here tell us the 2 rules. All right.
1:00:24
Thank you guys for joining. And remember the 2 rules of
1:00:26
building wealth. Rule #1 live below your means
1:00:29
and rule #2 invest early and often.
1:00:32
The Personal Finance Club show is produced.
1:00:34
By Jeremy Schneider and Jen Mundia, Music by Essa Balu and
1:00:37
Homie. Send your questions to podcasts
1:00:39
at personalfinanceclub.com. The Personal Finance Club show
1:00:43
is Co hosted by Jeremy Schneider who is a co-owner of Nectarine
1:00:46
and SEC Registered Investment Advisor.
1:00:49
The views expressed on this show are those of the hosts and
1:00:51
guests and do not necessarily reflect the views of Nectarine.
1:00:55
Please refer to hellonectarine.com for all
1:00:57
relevant disclosures. This podcast is for
1:01:00
informational and educational purposes only and should not be
1:01:03
construed as personalized investment advice or a
1:01:05
solicitation to buy or sell any security.