Diversify Diversify Diversify
Wait, let's throw a few through now. Our l v travels are fidelity's freedom funds. A good option that covers the four food groups. Yeah, I have thirty six. Thirty six thousand nine hundred thousand in a fidelity roth I r a on off that twenty four thousand eight hundred in the freedom to o four five mutual fund. If it ft you know well, ash was a monthly amount transferring from the cash goes to freedom. Okay? And is this person an artist or freelancer who's doing this? I was seeming so I don't know. I release everyone. Can I go on the internet? Yeah. Okay. In fact, I brought one up here and maybe I didn't fiddle. I'll bring with them. Okay, what is the ticker again? So the ticker is ff f g x gx. Okay, so look what I did. I just plugged in the ticker to morningstar dot com. See how easy that was. Sam. Sam, I'm gonna print this page without the ads just to kind of get a cleaner look. Clean up all this other stuff here, okay? See how easy that wass look at that boom! There's your fund. Let...
's read about it I'm not going to tell you if it's good or not I'm just going to teach you about it so it's the freedom front so this is the target date funds that I talked about yesterday a great great option I know someone here in the room just opened up a roth ira no no names mentioned and say see so this is somebody who and I'm using this is an example to just open up a roth ira fidelity and he said, I'm waiting today to find out what I should invest in a company. This is a target date funds, so that means you are thinking that you're going to retire in two thousand forty five really, the date is the point is if you did hold this til two thousand forty five and by the way you confide in cell tomorrow so you don't have to but if you hold this until two thousand forty five as you get closer that age, they're just going to make it more and more conservative, which means they're going to put more bonds less smallcap, less international, less large growth in it. So what this fund is is it's three stars a little less than one percent and that's what just most funds are not as cheap as vanguard but this is still really low no load love the no load so you saw the page that I showed kind of chopped it up here? We're just going right to the page, the site so just in terms of what's in it, so it has fifty percent stocks, twenty five percent international stocks of thirteen percent bonds this is probably the on ly thing I don't like about these funds is their only thirteen percent bonds. So when the market went down in two thousand eight, thes were hurt a lot more than they should have been that's probably my only criticism of these target date funds there are a lot more aggressive than I would like them to be. So what I might do is that might have this and an allocation fund that has forty to fifty percent bonds just to balance it out if you're really in your I don't know how old this person is, so that might be something to think about, um, here's the returns performance boom eighteen and so let's jump right toe one year nearly twenty percent last year for the last three years, ten percent a year last five years, fifteen percent a year. Great that I look at the category so you can see here it's done a little bit less than other target date funds, this is still a great fund, great, great fund, it's cheap it's doing better or the same was the category and so what they're doing these target date funds as you can see their holdings there buying other mutual funds high income international all sector growth so they're buying the four food groups plus about seventeen other food groups but it's the same principle so you see how much we just learned about another fund? Yeah ninety nine per center who wants to know how quickly can you switch out of one fund into another fund family immediately? So if you're in one like, say europe fidelity you can buy or sell any of the funds that fidelity sells the mutual fund so hear this fund costs eleven dollars a share they trade once a day so you can put the order in right now but she won't lock in the price until four o'clock which is again what people like about f says that this trades throughout the day I'm holding this for the long term I'm not that concerned about it personally and there's no fee say you bought this fund it fidelity there's no feet or buy or sell it and just to show you so this find is twenty five hundred to open but in actuality um this is just a little caveat the purchase info is so initial ira is only five hundred toe open so you could open this as a raw fire air sep ira for five hundred dollars and and if you wanted to just not even have five hundred you could just lock two hundred. This is the automatic asset investment. You could just commit to two hundred dollars a month going into this so you have two hundred a month. Remember that? Charge that woman yes, I do. This is that here's your two hundred a month going into your roth ira. So yes, if you were to buy this in a regular account would be twenty, five hundred but it's for an ira it's only five hundred. So they're working with you freelancers come on, you want? I mean, a lot of people have sent in the mutual funds that ticket you do want that now, would you be doing that after the bike when you're let's, take a few more because they're kind of fun, huh? Geneticist u s I x x u s a a x x x u s I x so this is use a which is the government? The army another so it's yusa and then double x us a double x okay. And they say I have twelve thousand five hundred in it right now. So this is a money market, ok, so that after they build up emergency saving, so if you see here, you know they're not they're not making any money on this so this is a money market so you can see he remember we talked about money market point zero one percent that's what they're running on this how much do they have in in twelve thousand five hundred, which is great have that a mouse that money but they're not making any money so they need to just leave in there what is their emergency and then invest the rest it's a little market see and this is what to me and by the way they're paying point three percent for it so they're actually losing money? Um what is amazing to me is that when I go through this exercise with my clients or my seminars, we just start looking it up people get it they're like I get it, I see what I own right? There's no, I'm not like the wizard behind the curtain and I've been watching the wizard of oz with my kids and it's just like I'm not like pulling the curtain and there's this little person I'm just pulling it up I'm just showing you why don't we do one or two more? So this person is twelve thousand great congratulations that you save twelve thousand you know, take a few thousand but then your emergency but this pressed into retirement account or at least invested so yusa is the army and I think you need to you might be able to anybody can open it but I think it originally it was really only funds that you could invest a fewer part of the armed forces refute a family member and they have great benefits so I'm a big fan of the u s a a absolutely yeah because their yield is on the point o one and there have been started losing money yeah seeing that this is just no criticism no judgment like I can't believe you it's more just like let me learn about it while I'm leaving money on the table I'm losing money every year you don't know you're just one of the things that you wouldn't necessarily know exactly yeah it's pretty powerful right anybody do you have another one jan am says my single k account valued at about ninety nine about one hundred thousand dollars is with oppenheimerfunds okay and includes several ticker so I'll give you just give me one you want about uh oh p if we want this g I x I was hoping somebody would call in with this thank you for sharing that so this is a load fund so however much money was in this fund was six percent when she bought it or he bought it and then in addition to that it's one point two one percent a year this might be a great fund and I'm not saying it's not but right off the bat the first year they have to earn more than seven percent just to break even and fees can I share something with you from j otis? Ajay otis was the one with the twelve thousand five hundred that we just looked at the account that was basically flat lining. Otis is an accountant and says, yeah, this is good to know because I just opened it and this is what the account advised until I set up a solid emergency fund, but I'll probably move it soon after learning all this good information. Thanks, great. So this this is a world stock funds, so this is an international fund and it's investing in smaller companies internationally. I notice that everyone in the room has gotten closer and closer, like so excited s o I love looking at international companies because it's, just so fun to look at the names you're like. I've never heard of this, so nokia is probably the only one we've heard of so that's a midsized company based in so this is world, so this is probably all over the world, and then they actually do break out the sector. I didn't even talk about that, you know, it's just like a fun thing to see, I think so the highest percentages and technology and then a healthcare and so on um so then, if I look at the returns so here they're comparing it to the index. So this fund has done well, if you look at it compared to the index, it has solidly, solidly outperformed the index. So on one hand, if she's, if this person has owned it for a long time, I'd probably keep it because they've already paid the load fund. I just probably wouldn't have bought it to start up because you can't find a fund that's doing this well, that's no load that's my only caveat, but if this person's getting great service from oppenheimer and oppenheimer's a place that you're probably working with an individual's if you're grating, getting great service and you understand and you're happy with it, this is a really great fund in terms of performance, and actually the ongoing expense ratio is only one point two, one higher than I would like, but it's still below the average. Yeah, so is the fund ever closed? I mean there's only a certain amount. Yeah, great, great question! Absolutely in fact this doesn't say closed fund's clothes all the time, which means they don't accept new money anymore. Absolutely, and I love it when a fun closes so it's, really a small cap in international funding will close. Because they're buying small companies, which means these companies cost less and if there's there doing so well that so many people are buying it and money rushes in, they can't necessarily fill the cash like they've too much cash, which means they're not gonna be ableto provide the returns and so even though they'll be making less money is a fund manager there making a really, really smart decision saying, you know, we can't take out new money because we don't have enough companies to buy and so really good cos close really good, you know, I seem like I have a great grade smallcap fun that I've owned for a long time that's closed what it means is that if you own it, you can put more money in it yourself, but if you don't own it, you can't buy it and sometimes funds reopened so funds opening clothes all the time. So it's a great question do you question here? Okay, good to know, ok, so that low ginger livingston asked if you already have a lot of fun, should you keep it because you've already paid? Yeah, yeah, absolutely. If the fund is good and you like it, keep it absolutely now I will say sometimes people have a managed account, which means they pay one to two percent a year and load funds are waived you can ask the question if you're working with an adviser say I noticed I have a load fund did I pay that load in addition to the fee I paid you a lot of times the load funds airwaves and it but it just shows up here like that so why don't we do one more fund cause and then we'll move on to our we have some really long one so we just pick yeah guys thank that she's fun to kind of pick thank you for sending in all the like amazing detail and you know it well and that the end of the day if we have time we can do them like we'll see you know if we're able to get through some of our information before after a break so let's have a look at this one uh jen m an artist in new york city super excited about a retirement forecast surgeon where is gonna get one off yours for now uh let's have a look and she's got a lot how about or double o s I x double o s a ex so this is another oppenheimer so this is another open now because I have once it on yeah let's do one that's not open that q v I p x q v o p x number two so probably if your money is at oppenheimer you're going mostly oppenheimerfunds you know thanks for showing this okay this is a load fund they're paying above the average one point seven eight percent how many stars you know one I'm sure it's been great but one star means it's pretty risky so before even look at it let me see why well let's see last year it did nine percent worse than the category the last three years that did eight percent nearly worse in the category the last five years it did nine percent a percent worse than the category is that how you want your fund to perform and again people don't realise they have this I saw the last time you pulled up it said bronze next too and this one's this negative yes it's just morningstar's ratings I'm not sure what they are don't follow them frankly I don't need to say modest she does have another fund so what about her roth I r right? What? How about a n like nancy w e x okay, so these air american funds american funds is a really, really awesome company they do have loads, but once you pay the load, the expense ratios a regret it incredibly low I personally wouldn't buy american funds is because I don't want a lude I'm cheap this is where I don't want to pay but I'm in an informed consumer um but it's an excellent company, excellent companies so I really anyway so this is a world stock so you can see it was a five point seven five percent load up front but then once you paid it it's only point eight percent a year which is really cheap s so this is international so you see where I saw the world stock large growth is going to be large companies international just kind of another little tidbit the difference between foreign and world world will include stocks from the u s where foreign is truly non us just a financial term you know when my trial because callie gotta has been psych right online such agood chetta let's just throw a cal I gotta wonder now just quickly just show so you can see they have google but they also have novo sml amazon so that's why it's world it's got us and on us from a return basis so you can see it's doing better than the morgan stanley or the international index you can see here it's four percent on a three year basis so it's a great performer it's a great fund it's four stars so you see how I'm just going through the checklist what is it? What did I pay what's my risk grading how am I doing performance wise it's not that hard really it's fun, isn't it? So you decoded I want to know what you're looking at and to be able tio make decisions about it without my side once you should not own this fund, you should buy it or sell it I know you don't have to love it right? And either way I don't get paid on owning any of these funds. I'm not registered investment adviser I had all my serious sixty three and seven when I worked on wall street so I was able to buy and sell investments and sell to clients but I don't do that anymore or so I'm not making one cent off anything that I'm talking about are suggesting nor want to all right is this fun? We're going to win ok, what do you want more w c u x t w c u ex american century so it's gonna be another american century fund is ah, no load funds so this happens to be a no load. So this is where just I think my sort of expertise comes into account when I see large cap I'm thinking, why are you paying for large cat when I just get the large cap index fund? Why are you paying tohave it be what's called an active invested fund when you could do an s and p that would probably be the same over the long run and just to show you the example it's not that it's a bad decision, but if you look at the performance they're comparing it to the s and p on the whole you know it's done about two per cent maybe a little bit less than two percent better than the s and p but you're paying for it because this fun costs one percent a year see the expense ratios one percent so maybe it's doing a smidge better but it's not always going to do that much better but you're paying ten times the amount than you would for an s and p five hundred index fund so in the case of a large cap like what are they owning in this apple google star but I mean that's what is in my large cap so yes they are doing well so it's not a a bad fund to own but I'd rather just buy the index fund it's a lot cheaper it's probably do better over the long run so in terms of investing it's so important what we just did and we're going to by the way do it again just like I started going over the investment terms now that we've learned about investments we've got to keep doing it and that's one of the things that my clients keep saying to me is like well how do I keep learning and like just keep going on morning star but what you own like you can see it's not that hard I just did on my computer it's really, really easy to get that information. The second most important thing you could do with your investments is make sure that your mix, in terms of the stocks of the bonds, the international is diversified and that's what's called your asset allocation it's a real investment term, it's a real financial terms, but it's probably one of the most important things you can do once you're investing. So you saw that people called in with their numbers, and some of them were diversified in some of them weren't it's when I studied finance in college, and I got my mba and finance again, it's what my professor stressed to me when I started studying financial planning, it's diversification, diversification, diversification, it's like when you buy real estate, location, location, location so in terms of when you're starting to invest and looking at your portfolio, it's really making sure that your investments are mixed with in your portfolio? It's the most important thing you can do for your investments, and you have to balance them and change them every year. And just to show you an example in this example doesn't prove it one hundred percent, but what I did here is I created a two portfolios, so the red is just the s and p five hundred, which is large cab that's it and then the blue is a diversified portfolio so I put the four food groups in there and I just put four vanguard index funds the really a purpose of this in two thousand one two thousand to two thousand eight we had three down markets two thousand eight the stock market went down forty percent diversified portfolio went down much less two thousand won to you lost much less so maybe you're not making as much but you're still doing pretty good so for me especially as I get older and I get closer to when I want my money I want to make sure that I'm not going to lose as much you're diversifying so you don't lose as much when the market goes down that's the main reason it's like buying insurance which we're going to talk about this afternoon why do you buy insurance because you hope you never need it do you buy insurance because you want to get into a car accident? No do you buy insurance because you hope your house burns down or even life insurance worse course not you're buying life insurance you're buying car insurance, home insurance you can sleep at night, I would say I could never sell life insurance or home insurance was too emotional for that, but that's why you're buying insurance that's why you're diversifying your portfolio? Sure if I could count on these high numbers sure, why not? Can I've been working on wall street since ninety two? So I've been working in the markets, so I've already lived through just three in the last ten years and in the nineties as well, there was one little downmarket, so here I think I'm a relatively young investor and I've already lived through practically four down markets, so in two thousand eight, my portfolio went down eight percent when the total market went down thirty eight percent. So yeah, I lost, but I lost less and that's why you have it? So I'm doing this, which, yes, so maybe I'm not getting the twenty four percent, but I'm getting the fourteen percent I'm not that greedy, I'm happy with fourteen percent so that's my point of diversification. So if again, if you only really have enough for one fund, you want one fund that does this and very often people that are young and I especially saw this when I first started finance doing my financial education, so I really started in two thousand, two thousand one, two thousand two, and we had just come off. You know, being out here in san francisco but in new york we just come off the whole dot com and so people would show me their portfolios and ninety percent was in a small cap mutual fund a small caps tend to be the best performers you saw that you were like whoa that's a great performer sure, but guess what? You know what smallcap lost here about fifty to sixty percent yes, if you're twenty two, you can handle that but it's going to take you still a long time to get back and I would much rather have a weighted average of eight to ten percent then a weighted average truly that's going to be four to five percent when you take those really big losses into account. So that's it it's kind of a sobering thought we got really excited with the mutual funds but just really thinking about diversification and that's something I see no, we talked about I think of his cotman was it the first day or the second day about getting your finances simple find getting them organize and that's why? Because chances are if you have an old four oh one k if you have an old ira that you have it rolled over, you're not diversified, you've got the same investment you probably have too large cap, you probably have three small cap you probably have different, you know, different funds that are doing the same thing with different fees you're probably paying different fees so you're not diversified and you're really not protecting yourself in a down market, so when you're looking at your investments is probably the most important thing that you can do is just make sure you're diversified, so going back to this so this is your asset allocation, so just to go into that again, make sure you've got these four and you really only want one or two of each ideally for but maybe you have, you know, a small camp and a mid cap or maybe of a large cap blend, which is the traditional arts cap within the international, so I've broken it down once you have the four emerging markets, real estates, a commodities are like gold and medals and things like that, so then you could have specialized you could have just a technology fund, which could be a great fund that should be five percent two percent of your portfolio. Um, I have a client who has a wonderful health care fund that's just invest in health care cos you can also do a specific country fun like maybe so he's going to go and buy the australia fund um so that's the idea of diversification, so when I talk about doing my checkup once or twice a year that's the thing that I do is I make sure that my asset allocation the percentage I have in my food groups are balanced and probably the easiest way for me to re balance is you either have to do what's called buy low sell high so you actually what the books tell you to do is actually sell the fund that's done well and put it in the fund that hasn't done well which is hard to do but I'm usually adding money to my accounts once or twice a year because of matting money to my sep ira so I just added in the category that's a lower percentage because that's the one that probably hasn't done a swell so that's how I balance it out so that you know for my goals to probably be about my forties so is to be about thirty to forty percent in bonds so I'll have you know so if I see my bonds get too low that's where I'll add my money once or twice a year any questions questions so let's just finish this for a few minutes when we come back after the break we're gonna actually go through some more funds so people send him in because it's really helpful I think seeing what other people's funds got we also have some funds here and the other thing that we're going to go over is we have a few people have actually sent in their spending numbers there, how much should I charge number their retirement forecast number so that somebody sent that in? And I was able to work on that this morning really quick? And so that'll be really fun to look at. So if you're just starting to invest, start with what's, an allocation mutual fund or target date retirement fund, so again, just that only sort of disclaimer ass trick with the target date fund is make sure that it's, um, not too aggressive for you, your homework. So if you have mutual funds over the break, learn about them with the checklist with morning star, so if you've bought the course, you can go back and look at the checklist again, or if you've enrolled, I know the checklist is one of the resource is, and in addition, we also included a morning star page with all those key term circle so that's something that you can look up your fund and morning star have the checklist next to you that's, a really helpful tool and that's actually what I'm doing a seminar that's, one of the things that I do is I have the participants rip off the checklist, so the checklist is in front of them, and then I have them print all their morning star pages and just I mean, I'm trying not to use too much paper but just nice to kind of like print a pure morningstar pages put him on a table I'll put the checklist there and just go through it it's kind of a fun thing teo and again once you just learn a little bit like what we learned which is pretty mind blowing I think the answer's right there so you don't have anyone to teach you about it and that's that's my big message is that it's your money you could have the best money manager but you still have to know they're doing this by the way so shouldn't you asking these questions um and just a quick stories that I was teaching someone this in a class of participant she was a photographer actually and she's so quiet and you could tell she was processing and I keep saying, are you okay? You okay? And she's like I'm fine, I'm fine and so she this was a four week course that I was teaching, so she came back the next week and she said, I have a financial advisor and I realized that I needed to call them and ask them these questions and I said, oh great, did you she's like, no, I'm too nervous we said, well, two things are gonna happen and you're going not, you're going to call him up, and you're going to be completely honest, you say I'm not leaving, I'm not taking my money, but I just took a personal finance class and I'm learning about my money. Can we sit down and go over the investments and see do my investments match my goals? What kind of fees? My paying and my diversified what's my asset allocation, these roll terms, we just learned that makes sense this in this advisers either going to be really angry and feel threatened and sayo why're you want to know is that, aren't I doing a good job or they're going to roll up their sleeves and be like, I'm so thrilled that you're taking an active role in your investments let's sit down and go over it. So she did the third week she came in, and it was that b it was a great story. So here's a case of a great and adviser where the adviser center I think it's the best thing that you could do that you're learning about this, it makes my job easier when I have clients that take an active role so clearly this adviser is doing what he should be doing he's charging the six percent or one percent whatever, but he's giving her the service, she was diversified, she had grave funds what the only caveat which is why you should have a conversation with your advisor if you have one he didn't realize that she was actually using that money to say for an apartment which was a three year goal he thought she was saving the money for retirement so he was being more aggressive, so as soon as he realized that she wanted that money sooner versus later, he was like, we need to make this much more conservative so he was totally doing his job, but if anything he weren't having that communication, so if you have an advisor asked these questions it's only going to enrich your relationship and if they're not comfortable with it, find an advisor who will cause there's great advisors out there probably some of your watching this who are thrilled that you're going to take an active role it makes your job better here's your homework if you have mutual funds, learn about them with the checklist on morning star make a decision if you should keep it or salad re balanced report folio and make sure you're diversified it's a lot but it's really easy too. If you don't have investments just really pick a mutual fund for your ira, make sure you're diversified and for all of you continue toe learn about investing now for anybody who has money recently joined us and didn't hear is run through the mutual fund checklist yesterday when you're in wolf afraid one of the many city useful work sheets you get is this mutual funds checklist and as golly referred to it has mutual funds I own chiklis in the front, but it also has the breakdown on the morning star we're all a little bit circled, so you actually can understand what's going on site, that is a free bonus material when you enroll and it is not too late to win roles and make sure you do, uh, e might. There were two things that you've said this morning for maki takeaways first was if you don't understand it's simply don't wanna write, but coupled with we watch the mutual funds section of your course for the second time and it's so easily understood so that you know don't don't know enough just quickly because you don't understand it like if you take that extra time to reward right? It's crystal clear it's just fantastic well, and the other thing, too is that I realized that timing wise, I started going over mutual funds at the end of the day yesterday, which you could you could be the best night, al it was still the end of the day when we had gone over just a lot of wonderful material, so I thought let's start again when we're fresh, we've had a good night's sleep when it's sort of the first thing we're digesting yes so after the break we're going to run some more figures we'll keep pushing suri with this very clear and concise understanding of stuff that has formerly a lace to maybe in a little bit tricky now I want to share with you some of the internet in the chat room again you know what's interesting today is that in the last two days of this workshop there's been a lot of chat today it's in question ted question tab is going off in fact that you know everybody is just a thing bang bang, bang bang so many questions about what you're doing it's fantastic but in amongst that huge amount of appreciation so what in this trailer would say what what I says thanks scalia yesterday I consolidated too my four oh one k my ira into one account and working on moving over my retirement count two the same retirement account to the same company as well it's such a relief and it makes me feel more powerful cindy says thank you again this class has been so great and there is just a constant through that page of thank you thank you thank you thank you it's amazing it's my cheeks are hurting smile I feel the love thank you thank you thank you thank you thank you thank you