Diving Into Mutual Funds and Investments
I woke up this morning, I thought, okay, this is the third day, and I just realize how excited I still was to really share this information with you. It has been a wonderful journey with me to be here with you, the reason why is because I've already heard from so many of you, I mean, literally the face to face just in the office and the studio that people that have listened, but then I have gotten emails and tweets and texts from people I've never met I've gotten re acquainted with someone that I haven't spoken with in nine years, I have heard mohr importantly, what I've heard of people already taking action steps action item steps, our studio audience, which I'm going to have to share later on, but just really thie action steps I've seen people or have heard people make already changing our money conversation, setting up iras, realizing what was interesting is I've worked with already three people just in the last two days that realized they had more than they thought they did when th...
ey went through the numbers, they forgot about money there. Like I said, what about that? Oh yeah, oh yeah, oh yeah, I also heard from someone who said, you know what, I'm in a better situation than I thought, I wass not making this out what I did here for some people say it's a little sobering and I realize that I've got to make changes I could do with them you've shown me how so these are all different scenarios all artists, all freelancers, nobody wealthy and they were all wealthy in her own right but no one's giving them money and they're all doing it and this is the first time they're learning about it so if they're doing it, you can definitely do it. So just to recap what we've learned the last two days, the first day was definitely much more of an overview about why we want to be here, why we're showing up and what was interesting just even hearing from usual marie and javi air is and I said, why did you come and they're like, well I knew it you know, maybe just share for a few minutes about why you came but then really what it's turned around for you because I thought that we is it a story definitely um an awareness that it's a continual learning process finances, you know and it's also just breaking even the habits that um maybe it was passed down through friends or just the way you thought it should be? I I have had many conversations with my husband about you know, should we give over control to someone else to manage this for us um and I did not expect that we would be getting this much into investments and really breaking it down so the bottom line is that I had a lot of conceptions about things I had a lot of misunderstandings about things and I feel empowered I feel like I actually can be my money manager myself and that I know what to do I know actually now what to do with my savings and I am I'm definitely going to take action on the mutual funds because that is the next step and and also just all the tools I mean, I can't even I don't even know what we're going to do today I'm just going to say we're gonna blow you away today you you ain't seen nothing yet yeah how about you have you I mean, what did you think when you were coming? I thought, ok, I'll learn something about my money but how much am I really gonna learn are you know actually I think I was this this workshop for me came exactly at the right time because I had just I made an appointment with a new sepa like right before I found out about this workshop, which is what actually, you know, when I saw that they needed a live studio audience, I was like, I'll go that sounds great, I'll take three days and go and do it and I definitely knew that I was going to learn how to maybe manage my money maybe budget I did not know that we were going to go into, um finance and, you know, mutual funds and stocks and thinks so and that's these are things that again I'm not really familiar with and I think for a lot of freelancers and a lot of people in general, you know, as freelancers, we didn't go to freelance school I started freely didn't get free land school like we learned so many things from our peers about, you know, hotter charge what equipment to get, you know how to approach clients, how you know there's all these things that are involved in being your own boss, which is great, but there's a lot of things we don't know, and so one of the things I think that I'm really learning here is how to take control of my finances, how to feel comfortable with those finances. I do not feel like totally overwhelmed by them and then also you really changing the conversation around this finances with with my colleagues, which is one of the I think probably one of the best things that's come out of here, I've already contacted some colleagues and they're interested in finding out what I know about finance this and I'm going to help them out and so then having that having more camaraderie around that it's also it's good for me and it's good for it's, a win win situation for everybody. Really? Yeah, and it's something that I've known it's just being here for the last few days, I've heard people talking in the hallway, not to me, but just to themselves while they're getting tea or coffee or just around the water cooler is, they're talking about roth iras, we're talking about investments or talking about goals they're saying, hey, can we share our numbers and it's just it's such a growth area? So I'm loving it just loving and I have to say it's been so personally fulfilling for me what we talked about the first day, which I think is something that maybe it's just check in with that is really why are you here? What are some of the goals? And hopefully those goals have gotten clear and clear for you because initially when you showed up, you probably didn't know what you wanted to do with your money, but you knew you needed to do something, but you've gotten maybe a little more focused. You've made those goals more bite size, more dollar specific and that's really key is saying, I want to save two hundred dollars towards a rainy day, I need to talk twenty percent more. I want to learn about these mutual funds that I've got. I'm going to set up a roth ira and put a hundred dollars a month into it. I want to save a thousand dollars a month for a down payment make those goals much more bite size specific we talked about how do you find that money and that's really through budget or spending plan covering the four different spending plans again? Go back to that. Then we delved a little bit more entire retirement. What are the different retirement plan? The roth iras, the sep iras, thie individual for one k for you higher earners or aspiring higher earners? I hope we all open individual for one case. Where can you open it? Fidelity vanguard t rowe price tt a tray that again the world is your oyster is a freelancer. That's what I love that you have the opportunity to pick wherever you want. So we talked about the actual vehicle and then stay. We're going to go mohr into the mutual funds that go into that vehicle. Go is that proper english that go into that vehicle? So we learned a little bit about it, but they were really going to delve into different mutual funds and had understand them. So I've got my own but I've already gotten a lot of suggestions from you out there and asking and I'm not going to tell you should you buy it should you sell it should you keep it that's not my job I don't sell investments nor want to but I'm educating you about the investments and I guarantee you when I start teaching you about it you'll figure out very quickly if this is something you want to own or not and then just when you thought you couldn't learn any more we are going to finish off our day with finishing the checklist our financial checklist that's really the estate planning it's funny because a lot of people and I thought this to think a state planning is just for wealthy oh well I need a ten million dollar trust to heaven estate that's not true estate planning is for all of us if you have a piece of artwork that you'd like to leave to someone if you have a four oh one k or an old ira you've got to figure out your estate planning so we're going to talk about a state planning today for everybody and especially artists and freelancers that might not be in a traditional relationship or traditional sir situation and this is where you really need to protect yourself and I know because I work with a lot of people who are not living a traditional life necessarily you've got kids we'll talk about that also talk about home finance because I'm a big believer in owning a home and so the question is how does it become a reality and understanding that the mortgage numbers and finally we're going to finish the day with how do you do this all in thirty minutes week so you can go out there and make your money and make your art and share it with the world? All right, let's get started I'm so excited for today you know you can have an investment or finance class without a ben franklin quote an investment in knowledge pays the best interests of this was you know, I was actually thinking last night about the student loan because when I had mentioned that the student loan is a good debt, you also don't want to take on too much dae so I think the student loan is a smart loan but it's still alone it's still alone were you owe money and you have to owe that money and you have to pay back so if you truly think, well, I will not be making a lot of money and I I'm okay with that and there's no judgment around that then you probably should borrow as little as possible so you do not have that pressure if you've already done it, you've done it let's move forward to pay it off but I just that question really resonated with me from the chat room was like, well, how much should I borrow? Because you said student loans are good well, they're good but it's still alone it's still a debt, but it is definitely the best that you could get peter linch so I talked a little bit about peter linch you sort of the grand daddy of investing he ran the fidelity magellan fund in the seventies and know what you own and why you own it. I mean, this man ran a two hundred fifty billion dollar mutual fund and he's telling, you know what you own and why you own it? And I just cannot tell you how many conversations I've had with clients who said, oh, my advisor is trying to sell me this trying to sell me that and I'm having trouble explaining to them what the financial product is, you don't know it, you don't buy it you don't known in why make your life so complicated that when you get a statement, you have so much fear. So hopefully today you'll understand more about the investments that you either own or would liketo own, but if you don't understand it and you've tried to understand it, don't own it it's that simple so what we're going to do is we're going to take just a few minutes and really covered what we talked about with mutual funds and investments yesterday and whatever I'm teaching this class over a multi week course, I always cover this twice because for a lot of you this was the first time you heard this information, so we're just going to go over to again quick? Well, we've had a good night's sleep you've had your cup of coffee or tea and and you'll it'll hopefully be familiar to you and it'll just just think in a little bit deeper so again, why do you need investments? I had this conversation this morning, she said. Why opened my roth ira? Why do I need investments? Because investments are the vehicle that make the retirement of reality or just make your goal a reality we'll talk a little bit about what if you just want to invest, not for retirement in other areas, your money will not grow. I saw the the sobering numbers here yesterday when I talked about how inflation can really erode money in a savings account over a long term again it's the difference between retiring and not retiring and what I'm asking you to do is taken interest in your investments, which I've see already people are and they give it is exciting this is not a you know, complaining session this is none of this is a really excited to do this you can learn about investing I've already seen it here from artists freelancers night I I see it all the time I wouldn't put this here if I didn't think it was true. So what are the two areas you want to think about? When do you want your money, your time frame? And you're going to match your investments to your goals? We're going to talk a lot about that, so really think about if you have saved some money when do I want it? And then risk level? Do I want to be very grasshopper conservative? And I'll give you more pointers about that, but again, these air to questions on lee, you can answer, and hopefully you can get really clear on when you want your money and and we don't always know when we want our money, but we have an idea and we want it for security in case we don't get another job or we don't get a job around the corner. Or do we really want to buy a home or passing camera equipment or something like that? That seems to be a big thing. The camera equipment come up a lot. Are we just saving for retirement and were in our twenties and thirties and we know we can't touch it for twenty, thirty years? So just the terms again, a mutual fund and we're really focusing on mutual funds, and I talked a lot about that yesterday because it's a group of stocks or a group of bonds and so if you just have one stock or one bond, you're really not spreading your risk, you're not diversifying, so the mutual fund is probably the best investment choice for most of us it's what I d'oh and I understand investments because it lets me monitor my investments twice a year and that's all, I really want to look at my investments, I don't want to look at it more in that second of all, the thing with mutual funds is that they do have the criticism of being really, really high fees, and we're going to talk about that because as I mentioned yesterday, I am cheap as they come, then we're going to the stock is owning an investment. So here's thie the simplified version and I hate that book excuse me like the dummies book because we're not dummies were all really smart, we can handle it, I mean, but they do a really good job of explaining the terms, the investments for dummies and such so stock is something an equity that you own, so if you own camera equipment, but maybe you've alone on it because you've borrowed money against it so a bond is alone and e t f is a group of investments that trades like one stock and a hedge fund is a very, very risky investment that's very leverage, which means they're usually borrowing a lot of money to buy that investment, and there was a lot of ah, there are a lot of questions yesterday about ann a t f versus an index fund and an e t f is a great investment, I just find that there's not as much information on it, and I don't necessarily care that it's trading throughout the day because I'm really buying my investments on a much longer term basis. So that was, I thought, a good point. We talked a little bit about index funds were going to talk more about that. So index funds are a mutual fund that essentially copy how the market is performing. So it's copying how the s and p five hundred, which is the five hundred largest stocks, is performing or it's copping how small cap stocks are doing or it's copying essentially how internationals doing so it's an easy way to just copy with the market's doing and you pay low low fees. So the example is that if you have to mutual funds that air the exact same fund. But when is an index fund that's? Only a quarter of a percent and one is one and a half percent just by having your fees lower and an index fund you have fifteen hundred dollars more on ten thousand dollars that's a lot of money just for really picking an index fund and I'll show you that today I'm so excited to show you that so we went over the four food groups and this is really and you know, I I again that this is something else that somebody was sharing li with me this morning is that they went into their four oh one k another for one cakes used me there sep ira and they moved their investments around because they realized they didn't have the four food groups. So what are the four food groups? The large cap which is large investments but the names you know, the g's, the apples, the microsoft, the coal gates the small cap are small companies, the groupons, the cos you've probably never heard of the tech companies, their growth companies international or companies that are not based in the u s so their western europe their third, third world countries or the bric countries brazil, russia sees a sort of settling in I'm seeing has saying yeah, I get it yeah it's good to go over it again and then bonds are loans from the government or corporation nor municipality is so you probably heard of munich bonds these are the four food groups you want to make sure you've got one of each after that you can do reeds which is a real estate mutual find you khun do emerging markets you could do bricks you khun do commodity you could do energy but make sure you've got these four food groups and we are going to talk about social funds as well because I know that's something that's a really important point for freelancers and artists is really investing with their with their passion putting their money where their values are and so that's s r I which is called socially responsible investing so that is our kind of our quick quick overview but I thought it was really important to just go over it again because I think if nothing else you're like ok, I get it I know what she's talking about and if you've bought this watch this over and over it's probably the best way for you to just stay fresh with it because you're not going to know this all in one sitting so it's really really important for you to keep being exposed to it over and over just as if I were to learn photography or learned production or or learn any of the trades that you are doing the art of artistry or freelance works that you're doing I could not learn it in one sitting I would have to expose myself, I'd want teo so let's talk a little bit about the mutual fund checklist, and so this is where if you have investments, you want to pull them out. Now you want to go through it and be able to answer these questions, and so we're going to go through this one by one, and then we're actually going to show you some mutual funds and really explain it if you don't have to have investments, great still understand this. So what I always say when I'm looking at investments is that if you can answer all of these questions about what you own, you khun, decide pretty quickly if you should buy it, keep it or sell it. So do I buy or sell a mutual fund or suggest buying or selling based on one of these? No, but it's really overall. So the first thing you want to look at is the funds category and this, to me is the most important, because especially if you had investments on we've already turd from that. A lot of you have an ira here, an old for one k. There investments from different places, you probably have the same mutual fund, you probably have a large cap. In three different places I see that all the time so look at what you own and that's going to be the funds category and that's going to tell you which food group is it the large, the small, the international there's loads others but that's really the four functions and ideally you really only need one of each so that's something that you might want to clean up, then it's going to tell you the expense ratio these two are the most important for me because those are the fees. As I mentioned, I'm really cheap about that, so I'll start with the load or no load, so this tells you right up front did you pay a fee to buy it or to sell it and it's usually a load is on average five point seven, five percent so you do the math you're buying something for a thousand dollars or ten thousand dollars right away almost six percent of that it was going as a sales charge. Now I have no problem paying people money for their services. I just want to know that I'm paying that and that's sort of my biggest criticism about this industry it's like saying I'm going to go by this black skirt and have no idea what it costs or I'm going to go to a restaurant and there's going to be no prices on the menu or I'm going to go to the supermarket and there's no prices. So why are we buying investments, which are not the fifty dollars, at a restaurant or the two hundred dollars, the grocery store, but their thousands of dollars? And we have no idea what the fees are. So, yes, I am getting a little passionate. I'm going to get on my soapbox here, so I have no problem paying someone sick percent fees if I knew about it and it's what I wanted to pay. So this happens all the time it happened this morning, I was showing someone of fine I said, did you realize that you have a load fund that you paid five and a quarter percent when you bought it? It's like no vanguard yesterday and looking a different? We're going to show you exactly where your great yep, really we're going right after this, we're going to pull up a mutual fund, the expense ratio, so I only support no load funds because I just don't want to pay for the fee, and usually a load fund is sold by an individual, so I've so if you're working with an individual, asked him about it, and if they're honest with it and they share it great, then the relationship can continue. If your credit getting great service when the person then it's worth paying for that, so I'm not saying that no one should be paying that just saying no, that you're paying it, make sure that you're told that you're paying it, how much it is, and that is part of that relationship. The expense ratio is an annual fee of mutual funds that you cannot get away from that's going to be in every mutual fund ever and it's really what the mutual fund is charging for their portfolio management and their administrative services. And, again, it's probably the biggest criticism of the mutual fund industry because they do sneak a lot of fees in there, and so that's something that when you talk to someone about a mutual fund that has a little bit of investment knowledge is seo, but I don't like the twelve b fees, why don't like the fees? And I agree, I'm not fighting you on that. I totally agree with you on that. So the average expense ratio for the mutual fund industry is one and a half percent, as long as you know that you can keep your expense ratio as low as possible, so I actually try and keep mine below either half a percent or one percent, and most of the funds I'm going to show you our point one or point two, five percent and vain guards, I think, is point two seven. So as long as you know what to look for, you can really keep yours as low as possible and definitely below the average. Then you look it so right away you can decide when you're looking your friends. Ok, I've got two large blends. Let me get rid of one. Okay, I've got this load fund. Let me sell it. Well, my expense ratio is so high. Let me sell it. Well, this is a good one. Let me keep it, see how you're able to already start making these decisions. I don't know. Maybe you guys are just making me feel good, but your seemed to be really I'm I'm just saying I see him more than I've seen for the last two days. You're both like, yeah, yeah, you know, it's settled you and your aunt, I'm telling you the light, baltar, just going to go up even higher when I actually pull up a fun and we can show it. You know what the key is? I think it's really interesting as you say, I'm gonna go through this again because I did it once, but it will click the second time, right, and I think that really resonates, right, I mean, that's which is why you should buy the course I mean, it is a cliche but really especially this section this is something you're interested in you can watch it over and over at your leisure the morning star rating so this is morning stars an independent company that rates pretty much the entire mutual fund industry so there's fourteen thousand mutual funds so it can be really hard to determine and actually someone had sent into question last night asking, well, how do I select a new mutual funds were actually gonna go through that so one of the things you can do is morningstar essentially rates mutual funds out of five stars five stars being the highest rating big big disclaimer five stars does not mean you're not going to lose money there's five star funds that lose money but it means within the category it's one of the best so what they'll do is they'll take all the large cap mutual funds and they'll take the ones that are the ranking from performance and then they'll rankin from fees and we'll give the top ten percent five stars the next twenty percent forty star, four stars and so on and so forth so my thought is I pretty much only want for five star funds like why settle for one star fun it might have a great year but the volatility of it it's not something that I want so I'll show that again then do you notice? We haven't even talked about returns your performance and usually when someone's trying to tell you something there like this's a great stock, it did like thirty seven percent last year you know they talk about how great things have done without telling you what it is can you handle it? What is the risk rating now we're performance is important don't get me wrong but let's first figure out should I own it? Can I afford it? Is it risky enough for me or too risky? So in terms of performance we are going to look at what is the performance the last one year, three years, five years on an annualized basis. More importantly, this is my more important number is how did the performance of the fund to compare to the market that's what I love about morningstar because they show that to you really clearly so you can have a great performer, but right away I'll say, how did you do compared to the market? Did you do better than the market? Or worse? Like if there's a large blend fine, I want to see how did it do compared to the large blend average or an international and it's just it's that information is there in one place I'm going to show it to you um, I think that's all I put on here, but there are some other things you can actually see the individual stocks and bonds. Signer. You would ask that you could see how long the manager has been managing that fund. So it's, like, would you buy a company or invest in a company that the company essentially, you know, would you give ten thousand dollars? Let's? Just say it's an example is an investment in a new company where the ceo has no track record. You know, she just started last week, probably not you so you know what, let me see perform for a year, two or five years, and then I'll give you my money. So it's very similar. Would you invest your money in a fund that has a fairly new manager again? You can get that information easily, but that's it that's all you need to look for, does that seem manageable? Yeah, totally right, all right, you ready? You ready?