On this episode of On The Money, David Ruedi fills in as host and talks with retirement planners Daniel Ruedi and Ryan Repko about how investors sabotage themselves.
They also answer several listener questions and cover news articles that quote the financial advisors at Ruedi Wealth Management.
(2:40) The Longest Economic Expansion in US History
(13:16) Listener Question: What is a Bear Market?
"A bear market is typically defined as a decline greater than 20%. The average bear market is closer to 30% but the textbook definition is a decline of greater than 20%. Most advisors use it interchangeably with “a significant market decline”
David Ruedi, CFP®, RICP®
(16:45) David’s comments about Uber and Lyft IPOs in Bankrate
Money Burning IPOs are Wall Steet’s Newest Darling
(17:48) Paul Sr.’s comments on Zero-fee mutual funds in Fiduciary News
The Fiduciary Duty to Investigate Conflicts-of-Interests with “Zero” and “Negative” Fee Funds
“It is a common marketing tactic called a “loss leader”. So at your grocery store for example, they will sell certain products at a very low rate, potentially even losing money, just to get shoppers in the door. The same applies here, they advertise a 0% fund, and if it brings people into their company, they can start offering them more expensive funds.”
Ryan Repko, CFP®
(22:03) Caller Question: I am currently at 50% stocks 50% bonds in my IRA, all at Vanguard, and I just got an email from them about a new low-cost commodity strategy fund. Does that type of fund have any place in my portfolio mix?
“I don’t see much of a purpose of adding them to an investment portfolio. People tell you they can be an inflation hedge; in the very long run, I think there is truth to that. But commodities can be extremely volatile, so there can be times when inflation is high and the performance of commodities is negative. So I don’t look at it as a great inflation hedge, there are better options out there for that, like TIPS (treasury inflation protected securities).
On top of that, the long-run expected return of commodities is relatively low. So you are looking at something with high volatility and a low expected return, so I don’t generally recommend them for retiree investment portfolios.”
David Ruedi, CFP®, RICP®
(27:05) Daniel’s Comments about the best Vanguard ETF for Retirees seeking to own stocks in Yahoo Finance
8 Best Vanguard ETFs for Retirees
“I looked around for a fund to invest my girlfriend in – she didn’t have a ton of money to invest, but I wanted her to be in something that was low-cost and globally diversified. If somebody wants a globally-diversified stock portfolio with low costs, it is hard to beat a Vanguard fund like the Vanguard Total World Stock ETF (VT)”
Daniel Ruedi, CFP®, RICP®
(30:13) How Investors Sabotage Themselves
“The biggest and most costly mistake a person can make is selling during a bear market or temporary market decline.”
David Ruedi, CFP®, RICP®
“It is just human nature. You see the stock market is down 5%, 10%, 20% - you start getting into these bigger numbers and people really start to panic. Even the small declines people panic over – you can see that with money outflows from mutual funds into cash positions. That is just unnecessary; if you are invested over the long-term, you can weather these – I won’t even call them storms – these normal interactions with the market. You need to understand what is normal in a common market. It is going to go up, it is going to go down. It helps to know the 15% decline you are worried about is normal.”
Ryan Repko, CFP®
(35:20) Listener Question: How has the stock market behaved in an election year vs. the year before or after?
(39:13) Investing Based on Past Performance
(50:28) Caller Question: Is Diversification a “Backup Plan for an Idiot”
“For someone to suggest that people should not be diversified is irresponsible.”
David Ruedi, CFP®, RICP®
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