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KJCE 1370AM>Audio on Demand>>WorthPointe Wealth Watch Podcast 07/05/2014

WorthPointe Wealth Watch Podcast 07/05/2014

Jul 6, 2014|

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And for work quite well watch -- Christopher manslaughter. Partner and founder of the worst point so we'll see. Tired of the same sales pitches disguised as financial advice Christopher is a certified financial plan. Real facts about investment. This state my. Good afternoon Austin on this beautiful Saturday. In the summer here in Texas hopefully years staying cool. Staying in the pools. For the air -- how are you doing it anyway. We're really excited to have you here -- -- today we are gonna talk about something that sounds kind of geeky in foreign and strange but it's important to every single one of you people of one Nobel Prizes talking about this concept and it's called asset allocation. Or in layman's terms how you carve up your pie thing. I'm joined by Scott O'Brien and Morgan Smith tell her -- good afternoon in Austin. As usual though we're gonna start awful news item from Scott less -- O'Brien back. US industry is booming again that. The US manufacturing activity is at its highest level since may 2010. This is surprising to either of you who knew. It's you know with a headlines out there some days it's ten minutes and ten was just they consequence of the rebound from a contraction -- around -- right yes but she would think well -- -- -- -- and you see the news you would think that you know -- people are still sort of depressed in the other economies are doing now well -- kind of thing but you know in the manufacturing is I think we actually talked about this ask us some time ago but manufacturing is moving back to the United States. And it we're never gonna -- get back to where we're back in the fifty and neither governor. Rosie the rivers to -- should be scared yeah I but it's you know the will only you know with a cost. That the rising cost of Mexico production overseas and then geopolitical problems overseas manufacturing is vaccine now. Actually more cost effective and a lot of sense. In the United States now on the we're seeing that in the production numbers and I don't think everyone in California. Exist recommend main attraction did it take its shares Erica talk on the Texas. Well Texas and north like north general South Carolina and Tennessee were if I don't think they're gonna -- Detroit -- -- I was definitely migrating within the US would be etched into CU what states are the most productive from -- not -- -- right to work they did -- nonunion states. -- -- had a lot to do it you know that's where MS -- you just the new auto plants of course you know I -- to give Obama advice but you know this stock market is booming. Mean really if you look at the news you think it was pretty bleak but it's not really that -- -- a but he didn't really beat know the worst president ever -- quinnipiac -- -- and the markets -- -- I -- -- -- this -- in the -- Sonia -- -- the problem -- -- his constituents -- -- not -- -- the stock -- that -- -- I think that may have -- to do that now and unemployment -- we argue that's a good number not at six point 1% this week down to six point one sound well. Could easily argue devil's in the details who's actually being hired and delegates at Christopher where were you are doing some hard labor next couple days -- yeah. Suntan there I'm -- yeah. I know I haven't noticed before -- on the weekends and a cotton farmer -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- And really enjoyed and you he you know their president and editor in -- somewhere. We're out of our minds here -- a and a we've got to get under the topic now asset allocation and really if you look at what a financial advisor doesn't if you look at -- every individual doesn't really do with help for not basically what's gonna determine whether you are where you wanna be in 102030 years is going to be how are you carve up your -- The first volley if the saved more then you may -- you -- -- -- good -- what you make but besides that you've got to say okay how much -- -- -- stocks how much store I need -- Thomas join -- in real state and even within that how much foreign how much domestic how -- small large high profit so there's all these little choices to make in making up your high. And I believe that was 1990s. That bill -- among others won the Nobel Prize for some research -- said. You know the difference between Sally and Fred as you look at their investment performance really isn't whether Fred and Sally pick the right stocks or whether they. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- When they looked at their performance further twenty years of prior to the data that study what they found out was that what really matter was Kelly carpenter pot so it was a big deal. The and it is a big deal I think one thing they're kind of start off with as -- foundation is one -- kind of alluded -- a little bit but what is an asset you can -- asset allocation -- what is an -- it's really in reference to what we call an asset class so what's an asset class -- if you look at the international market like you said you've got large companies you've got small companies you've got -- emerging markets you've -- value companies. And all these different groupings of stocks that have different kind of risk return characteristics and you can slice that those up and a certain pieces it and you may have who want more -- one piece in your portfolio than the other two reasons of risk and return of volatility correlation and those kinds of things so that's really kind of what we're talking about a lot of people when they hit -- -- asset class and -- really sure what it is it's really just a group of stocks that have similar characteristics. Unique from other groupings of stocks and you take all these different quote asset classes and put them together to go for -- and so what are the what are some of the things that we've done make you report. Leo very in the way you do you know we have hundreds of clients and our Furman. And there are many different asset allocations across our client -- so why does one person have -- allocation and otherwise why would I went more or less foreign stocks in my portfolio would have any reason for preferring one of the other. I was just looking at a white paper from a academic firm on asset allocation and they said one thing that you can't separate asset allocation -- -- See retirement income. So based on your your cash flows going in and out of the a portfolio that's really part but I think the biggest thing differently or frankly emotional considerations -- mean. It's knowing that stocks over time do better than and then you know. Cash and bonds why why have any casual about it right you know if if you see your portfolio down 40%. -- you're gonna jump off a bridge probably not a good idea to -- secure asset allocated like somebody who is going to be just fine without knowing that in the long term picture so I think emotional issue -- to answer question who's the big part of. Buddy you're -- on yes that's the biggest problem. For investors and I don't just -- individuals institutions do this -- they they get -- at the top and they sell everything -- conservative then when it's gone down they just celebrating period -- -- lock -- -- losses -- there's an -- to -- -- -- it is assigned to which is -- -- -- mentioned there's an -- -- this is which -- you put that -- -- together how much how much is in large US stocks -- -- -- -- emerging markets and -- you sort of put that puzzle together could -- -- -- will come after the break we're gonna talk about the firefighters pension -- that we work -- and some of their decisions about foreign vs domestic and why that might affect their allocation we'll see guys after the break. We'll never deemed insane. Between ramping government spending and uncertainty about our economic future most Texans are having doubts about their own financial future are you ready to take a serious look at your financial goals using the experience the only certified financial planner practitioner is it worth point. Would you like a second opinion under current advisor who may be selling you investments and insurance for commissions -- is it worth when he radioed I've come to make an appointment or call 8885447. 760. That's worth forty radio dot com 8885447760. Welcome back to work quite well why -- giving you an unbiased people under the hood of wealth management investment and financial planning. Once again here's Christopher advanced life. Welcome back us and we -- talking about asset allocation in the before I forget. Please find us on FaceBook and Twitter and Linkedin you can search for worth point would any. Like us status. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- You know that's -- -- themselves -- or keep our money and home and there may be some legitimate aspect of that but they're giving up something and what are they giving up Scott whether they gave up it really so the potential for higher returns and actually more. Lower volatility -- toll. And in the one hand if you could add to higher correlation and what is correlation. Correlation is basically it's a statistical. Term but when you think about it if elect to think about it as the -- of the engine if all the pistons are going up and down at the same time they're the -- gonna -- like crazy -- -- -- and -- in order to get a Nokia that's -- correlation that basically means -- one -- moving one way -- the other thing isn't necessarily moving the same way -- -- -- -- -- you want things with negative correlation your portfolio you wanted to move differently that way things don't you don't get these big swings -- -- -- -- what was interesting about. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Yeah what the Nobel Prize said picking stocks which stocks are in the air market timing was really a waste of time. Because about 90% of the variation returns between different funds was related to how you carved up the -- they asset classes or groups of stock not individual stock and the only thing you do when you focus on individual stocks as you you have less diversification but you don't expect more return -- one stock portfolio has the same wrist returned an expectation -- -- as a hundred stock portfolio. But -- a lot more potential for volatility -- you can have a disaster. Right so if my own at Enron. I don't have any better chance of getting a return in the long run then paste portfolio with a hundred energy stocks of basic lemon who said it might have been Noam Friedman said that the only free lunch investing is the diversification luncheon -- free -- and you should be only can. This is actually hadn't heard about this fuhrman's -- how. How did that conversation go I mean where they weather resistant to -- -- today as it did take a while they're kind of get if you win yeah. They're little resistant to it change only. To some degree because they've done well I -- done well so why change and it's a little bit you pricing -- studies were they've they've shown that people who live in Atlanta guess what stock but -- overly invested in Coca-Cola -- call and he used to be that people who lived in Detroit only subscribe to -- -- -- carmakers and it's just they know what Cheney have and it's done well so no one wants to make changes. It just doesn't aside that's exactly what you shouldn't do if that's what you're doing is doubling down on the risk that is your life so if you live in a city whose economic situations dependent on Coca-Cola and then you invest all your money in Coca-Cola -- -- -- the wrong direction you should have less Coca-Cola and other people because your job may be related to Coca-Cola brand the economy may be related to -- -- -- you kind of wanna go the other direction. So the -- your question we get some resistance and we actually made this recommendation last year. And as so we're we're getting some resistance from and I think there then when we showed him you know is charged in the -- I think so we're -- hope they come to see Illini in it it is a hard conversation because when you're doing well now when the portfolio and it did really well last year and so this they're not happy with the performance and it's a little bit counter intuitive I guess. I was give people this advice for this observation if you think about Japan so I grow up in the eighties when after -- legacy gripped Japan I was. Not -- Japan Texas Specter. So when I grew up in the eighties remember Japan was -- their stock market the Nikkei was just gone bananas you know there's as they bought Sony -- Sony bought Paramount studios and half the real state Los Angeles and it was like well get ready to -- and everything here ready to -- -- in the double my annual Jackson they did. -- buddies Kellan yeah yeah. So they were it look like you're on this. It's incredible path and people like only got to invest in Japan and Asian markets forget the -- market well flash forward to 2014. The Nikkei the Japanese market realize this is the second. Third largest economy on earth behind Germany. The Nikkei is essentially the same price it was in the eighties so Japanese citizens who made it didn't do broad asset allocation and diversification. Who -- big country that is what we call that. Really had a bad retirement. And that's why it's important when you build these diversified portfolios. You know somebody with a little well diversified portfolio likes it like we like to see they're they weren't harmed by them. Right kind of going back to this -- fund. There's a client of mine who's been got ten million dollars and she's there. She's where she needs to be and I -- it and she'd love stocks -- -- lift stocks to split. -- -- If you don't need to take this much risk is the other guy to really help give you with the peace of mind that everything's going to be okay moving forward he won't have a much volatility. How does that sound. Sounds critters so there are some people who may not want and as much risk and that's the other side of the yet even to restore with the same set of facts -- are run on a different portfolio brand because they're different people. Really do expect to win the question is what do we recommend for the allegation when -- client assets and and there's Benjamin Graham who has Warren -- teachers they always and they they asked him how we came up their nieces he always answer that question do you want to eat well -- sleep well that will determine what I recommend and ask sir what we have to talk to our -- -- -- -- -- -- -- sleep well and usually it -- -- like that but what we call -- gets his theory they use it mostly well we just don't wanna lose what they've made. Book which you know what I had dinner with one of my clients of the night governor great meals and they sit got a slap on the hand so their -- heat -- in their -- How about that you're one had a good -- you have time. We're gonna take a break now ladies and gentlemen will be back in a little bit to finish up this discussion of asset allocation. Between ramping government spending in uncertainty about our economic future most Texans are having doubts about their own financial future. Are you ready to take a serious look at your financial goals using the experience the only certified financial planner practitioner is it worth point. Would you like a second opinion on your current advisor who may be selling you investments and insurance for commission's -- worth -- radioed I've come to make an appointment or call 8885447. 760. That's worth point radio dot com 8885447768. Welcome back to work quite well watch giving you an unbiased people under the hood of wealth management. Investment and financial planning. Once again here's Christopher advanced life. Welcome back -- We are so excited to be reviewed here this beautiful Saturday afternoon we'll talk about asset allocation. I carve up your pie a wide different people the same set of facts have different portfolios. And the kind of the nuts and bolts of it this would have any weird asset allocation stories yeah you know what. Just organized and ready hello going to -- -- I was even in the script yeah honestly I would say about nine out of ten -- minor refute that. I'm not out of ten. Prospects that I see to me are weird stories because they come to me and they really know what we know about the -- and application and I've had a financial advisor and I'm really will allow committed and diversified across all these different asset classes and what will do -- -- do complimentary kind of review of the portfolio and this is kind of a different angle on -- when we're talking about these different factors that we know of small values and profitable companies that really hope -- enhanced return. On portfolios so it's weird that a lot of people think that there will -- and I think -- financials advisors -- -- -- be well -- but if you -- -- -- in where there -- within the portfolio a lot of -- purple as they may have thousands of stocks around the world and -- weighted towards large cap growth funds when actually you wanna -- the other direction. So that's kind of where I think that that's so prevalent still out in our energy and what's. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Ray and when you asked me if I'd seen anything weird it's just to really weird to me when I see these portfolios. Professionally managed quote debt. It seems like who's ever given them advice or whoever's doing it then you are intimately Nobel Prize India did the oblivious to those concerts. And it's it's they're. Cheaper leaving a lot of wealth on the table by just not do that simple thank. And so that's something. I think if you can find an advisor. Tom which and I know when I guess we've got a the second opinion programmers you -- it analyzes content instead be good way to find out really how much delicate issue I have with those factors you talked about play. In this not magic amid and we just explain it to you doesn't make sense smaller companies have more risk so you should get a better return. Over time. And and value companies GM is more risky. So you should get more return over time than if you invested in Google stock -- Google's the darling now an -- thinks he should get a better return but it's I don't know what to prices now it's everyone knows it's a great stock so it's that's already priced in. The block as I mentioned this morning in our meeting that could people misunderstand the question the question is what's isn't what's a good company right to question is what's a good investment. And that's a function of what you pay for breast and you can buy GM chief that's really the bottom line the -- Yeah so you put all this together I think people sort of gloss over the whole while asset allocation things well you know just. Also -- my age. From under and that's why allocation. In my opinion nearly -- a lot on the table if you get an idea what what I hear mostly is all I'm well located my guys got me in a whole bunch of stocks and and now we got 100 stock so -- sounds good fit yeah. I got apple and Google -- you -- That double this is truly in the YouTube Smith yeah absolutely well when you explained it the gentleman this morning. He he -- that he understood completely did and it was boy I dad I have to compliment him and a most people sort of look at you crosswise when you tell me you should start buying crappy companies I think there and instead of good ones but it but it -- think -- I was given the car example to yeah so what's a better car a Yugo world rice. Yeah little Rolls Royce is a better car but what the better deal here. What you have to know in the general price break -- -- if if the roles as ten grand it's a better deal. If the roles as 500 grand and the -- is six. I'm not sure what's a better deal to write a price and then if you're buying 121000 of different companies are different you -- dog -- and Derek yeah anyway. We're gonna have to go. Off into the the netherworld where financial advisors go. But we really look forward to chatting with -- next at least when we are going to talk to some local real estate experts we're gonna have a book. Real estate broker and the finance guy. They were -- talk about Austin real thing. Until then. --

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