Best of Caller Questions - New Year's Day

Let's go talk to Will in San Diego. He wants to talk about trailing stops.

Yes, I'm having a little difficulty understanding just how they work. For example, if I've got a stock and I put in a trailing stop at 10%, and it goes down 3% each year for about five, I mean each day for about five consecutive days, when does the sale trigger?

So a trailing stop is typically, okay, what is that high price if it's in an uptrend? And if you say 10%, it's 10% from that highest price. So with that 10% pullback, that's when that stop would be triggered.

Oh, okay. So it doesn't go like 3% each day for five days. And then it doesn't trigger. Well, 3% for five days is, you know, over 15%. So, yeah, it's 10% at some point. Yeah, it's kind of, it's going to hit that 10% at some point over those five days. Oh, okay. Oh, okay. I got you. Thanks. There you go. All right. Thanks for the call, Will.

Let's go ahead and play another invest talk listener question.

really I want to help this payment go towards like a down payment on a house or something like that whenever he's like 30 or something if I'm still alive but just give them the big lump sum of money rather than just make on to education. I've heard some new things about 529 about some other benefits with doing it but just want to check in with you all. Thanks.

Great, so 529 plans are great ways to fund education, right? They cannot be used for a down payment on a house without penalties. They're primarily limited to education-related costs, be it tuition or books, fees, room and board, anything that goes towards that all-encompassing education for your child. And it's also important to note that if you decide that you want to pull from those funds, well, just like retirement accounts, there are penalties associated with them.

There's a 10% penalty on earnings plus income taxes that will apply, right? 529 planes are taxed advantage accounts. So if you don't use them for education, well, there are penalties.

Now, similar to like a Roth IRA, you can also withdraw contributions, not earnings, but contributions, tax free, because the dollars you're putting in are after tax. But again, that reduces the growth benefits. And then the question for you is, and first and foremost, I want to say excellent job as a parent, those who can afford to help their children save early, because the power of compounding is the greatest thing on your side. Very well done.

And if you want to use it for a house, I think it's perfectly fine to put it in broadly diversified. Low cost from our costs are the things that tend to eat away the most at returns over time because they compound as well. Low cost mutual funds for a longer time horizon to help save for your child's future. So overall, I think if your goal is to save for a down payment on a house,

This is an excellent way to go about it. Plus, it gives you the optionality of maybe he doesn't want to buy a house or she doesn't want to buy a house. Maybe they want to use it for something else. Either way, the capital you're saving now will pay dividends, pun intended, for your child in the future.

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and just protect my portfolio in general from market selloffs. Are there any rules or problems using stopovers when selling any drawbacks to the strategy? Thanks. Love the show.

Well, the drawback is that you could be selling right near your support now. So you want to typically put that stop order when it breaks support considerably. And you know that the trend, the uptrend is clearly once that number gets hit. So oftentimes it makes more sense to have a trailing stop, move that stop up on a regular basis so that you

You're capturing more that gain as the stock does go up. I like the idea of having a stop. You should always have some sort of a stop there. And then you have to look at a stop order versus stop limit order or stop market order. So a typical stop order is going to send a market order that could be on a gap down where it goes well below that stop order.

And you might get filled at a much lower price or remember that as well stop limit orders just create that that limit sell order at the limit price or the stop price excuse me. And so there are some idiosyncrasies there that you have to understand and make sure that.

you're setting it the right way for your ultimate goal. So I like that you are thinking about this, but they are things you have to constantly shift as you, the uptrend continues, okay? Thanks for the call. Oh, we're going to go to Ryan in Hawaii, Ryan either. Hey Justin. Yeah, I'm here. I have a question on Roth IRA contributions for the coming new year. Okay. Currently I have a Roth IRA and I've been single filing taxes independently.

are filing single. But in the coming year, I'm getting married in January. And so that'll change my tax filing status. And congratulations. I'm wondering, thank you. But it's going to push my combined incomes above the threshold for contributing, which I think is about 240k. And I'm just wondering, is my Roth IRA, I can't contribute? Am I just going to basically hold it?

What's in the account now is going to be what's going to stay in there? No more contributions? Yeah, if you don't qualify, if you and your new wife don't qualify filing jointly and you make above the 236,000 level for next year, then, yeah, you would not qualify for Roth contributions. Now, you could do a backdoor Roth where you're

basically contributing to an IRA aftertax and then, sorry, yeah, aftertax and then converting it right away as well. That's something to look into and try to, that's what we do for clients a lot who do not qualify our backdoor Roths. Okay, great. Thank you so much. No problem. Thanks for the call.

You are listening to an invest talk, best of caller questions compilation program. Your comments and questions are always welcome. Call anytime 888-99-Chart. That's 888-99-CHART.

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This is a special invest talk. Best of caller questions compilation program. Remember, the invest talk phone lines never close. Please call with questions. 888 99 chart. So in this talk, I have a question about tears with the new administration. And the question is, so why are the tears so important? And how is that? Nobody talks that the consumer in the US will be paying these tears.

If we put all these import taxes on foreign goods, the goods will still be coming. It's not that we're not getting them. We just need to pay more. So by raising tariffs, this will be a penalty to the end consumer. How is that raising tariffs is bad for those that ship the goods? And again, how come nobody is talking about that this will just cost more to the end consumer? Thank you very much.

So I think there are two points to make here. The first one is you are correct. Tariffs are essentially a rise in cost, right? It attacks on importation that is passed along to a consumer. That is what happens. Consumers will pay for it. You know how I know this?

Because that's what businesses are saying. And so I would not say that nobody is talking about this. Walmart has said that they would pass along the costs directly to the consumers because that's what businesses do. If the cost of producing something increases, well, the cost of selling something increases because the margins they try and make them tend to stay the same. Now, it is also true.

that it is a way to hurt foreign companies. Now, I don't think that when you are using something from China to manufacture good, you're all of a sudden going to bring it back to the US. That's not how it works. The cost is going to be a lot more to be short. But certainly a country like Vietnam may benefit. Other countries within that region where you get a similar cost and now it is cheaper to manufacture their may benefit. So it does raise costs on consumers. That is true. But it can also be true that it hurts

The companies of countries that those tariffs are put on. And so that is why it is a delicate balance to play. Generally, I think tariffs and lessons for national security reasons are not a good barrier to put on economic growth. I think it's, it makes everything more expensive. That is very true. So your intuition is correct. I would say it is certainly something that is being discussed. Thanks for the call. We got time. So let's go ahead and play another listener question now.

Hey, guys, this is Brett from New Jersey. I had a question about my 403b plan. I have a 403b plan through New Jersey Teachers Association. I also took out a loan against that. A loan 6%, but a 4% of that 6% goes back to myself. I wanted to buy a boat this summer. My family loves it and I like fishing. I know it's not the greatest investment.

probably the worst, but I did it anyway. My fees with equitable are a little higher than I'd like. When I still be able to transfer that 403B to somebody else, even though I took out a loan on it, I don't really know how that works. If you have any information, I'd appreciate it. I'll be listening on the podcast. Thank you.

So first and foremost, I'm glad you recognize that a boat is not a good investment. But you know what? Life is about utility sometimes. And if you get joy out of fishing, if you get joy out of going on that boat, then you know what? Go for it. And so to answer your question about 403b plans or really any retirement plans.

Yes, generally you can transfer them to a different provider, even with a loan. But the complexity there is depends on how that loan is handled, right? It may stay with your old provider or it may move along with you or it may need to be repaid immediately. It depends on the terms of the contract with that provider. So that's something you're going to need to dig into. Another thing you're going to have to consider is if the provider you're switching to accepts transfers and accepts transfers with a loan on the account,

And lastly, I think it's really important here is that you want to ensure that the transfer is direct because you don't want to incur any taxes or penalties. So to answer your question broadly, yes, you can generally still transfer, but it depends on the specific agreements you have with your existing and agreements you have with your new provider. So you're going to need to dig into those things.

Hope you've been telling your friends about the Invest Doc podcast being available in video form over on our YouTube channel. And you can leave your questions in the comments section over there as well. And we'll get to one of those now. And Jim Lee says, I have a question about cover calls when it comes to dividends. If I sell a cover call and during the time the company goes ex-dividend, do I still get it? Yes, you are owning the underlying stock. It means you are an owner. When you short a call option that's just doing a cover call, you're shorting a call option.

You're just selling the right to sell that stock to you at a future date or to the buyer, excuse me, of that option at a future date. And that's it. That's all you're doing there. You still own the underlying stock. Now, one thing to watch out for, though, is let's say you own the underlying and you sell a cover call, and then it goes in the money.

And it's sitting there in the money while right before an ex-dividend date, especially if this is close to expiration and it's well in the money, oftentimes that the owner of that call option will execute their right to buy that stock from you, even though there's still time till expiration because they want the dividend. So it means the dividend is more valuable than the time left on that option. And so that's one thing people

don't understand sometimes is, hey, if you're going to own companies that pay a dividend, that you're going to sell a cover call. It's a pretty small income. We run a strategy like this. It's called equity income plus. It's a great strategy. And we love the way that works. But you have to be cognizant of when those ex-dividend dates are. And if it's in the money, those options are in the money, you can get called away.

means that the stock will be sold out from under you so that other person gets the dividend. So make sure you understand that dynamic. Thanks for the question submitted via our YouTube channel.

You are listening to an invest talk best of caller questions compilation program. Your comments and questions are always welcome. Call anytime 888-99-ChART. That's 888-99-CHART.

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You are listening to an invest talk, best of caller questions compilation program. Your comments and questions are always welcome. Call anytime 888-99-Chart. That's 888-99-CHART.

Hey, Justin or Luke, Joe from South Carolina here. Just a question, whenever you have investments in like the S&P, ETF, BOO or VOT or those types of indexes, I hear you guys talk about taking profits. I'm invested mostly in IRA or Roth IRAs. So they're all retirement accounts. Does it make sense to take profits? I know the thing is kind of when times are good and you're feeling really good about your investments and you're up really well.

You should look to take profits. And when everything looks terrible, you should look to buy some more. And it's kind of been doing really well lately. So I'm wondering if it's time to maybe sell some of that and take advantage of the gains that I've gotten, or if that's more of an individual stock strategy. And when you're in these indexes, that just makes sense to leave it in there and just let it go.

I'm 30 so I have plenty of time for it to go down and come right back up again before retirement. Thanks so much and I will listen to your answer on the podcast.

So this is a great question. Generally, when people talk about taking profits, they are talking about individual companies because your investment strategy is allocated between X number of companies. Some of them will go up. Some of them will go down and we are up a lot on a security. Well, you want to lock in some of those profits. And so what do you do with those profits? Well, you rebalance them to other names. Now, similarly, this could be applicable in your portfolio.

Now, if you only invest in the S&P 500 and that's the only thing you put your money into, well, then you wouldn't really want to take profits because we do know that time in the market beats timing the market and you have a long investment horizon and you nailed it on the head. You have the ability to ride the wave of volatility up and down. And so if the only thing you have is an S&P 500 ETF.

Well, then what would you be taking profits for? And so no, you wouldn't want to do that. But if your strategy, if your portfolio includes many different ETFs and you are trying to target allocate them based upon a decision you have actively made in your portfolio construction, well, then you would want to take profits because that gives you an opportunity to rebalance. And so in a way, you can think of that as being

anecdotal to individual securities because you have various weights that you're ascribing to various investment vehicles. And so taking profits affords you that opportunity. I think it all comes down to what is your strategy like. If it's a one, if it's a one ETF strategy, then you're not really going to take profits because you want to keep it in the market. So hopefully that helps. Thanks for the call.

Got a question for Justin or Luke? You're the best person to ask it. I was calling about Intel if it's worth holding on to or should I sell it? I would like to know more about a company which I've been tracking for some time. Curious if you think it'd be better for me to let it go and spend money elsewhere. Invest Talk is ready 24-7.

Quick question on a very risky play. It is a company that caught my attention because the ROE is like close to 100%. But what are some signs of a dinner recession coming? Well, first off, never take one man's opinion as gospel, including my own. Is it a good idea to sell your losses in a Roth IRA and just use whatever you have left to reinvest into better stocks?

When you give a recommendation on your show for a buy-in, like an entry point to buy a stock, if I already own it, should I go ahead and be looking to sell it? If this gets to 170 to 175 in that range, that's where I pick it up. Awesome. Thank you, Jeff. I appreciate it. Hey, Justin or Luke, Joe from South Carolina here. I have a question that

I received an inherited IRA. It's about $30,000. My plan is to take $7,000 out a year and use that to either set an IRA or a Roth IRA, depending on the year and how I want to pay those taxes.

But my question is, with it being December, I'm going to be taking the $7,000 out for 2025 in January. But then the remaining $23,000, it's all just sitting in cash right now in that inherited account. So I've kind of missed out on the market a little bit.

With my plan being to take 7,000 out of year, what your suggestion would be, would it be money market or actually going into stocks since I wouldn't be taking money out again till 2026? I wanted to see your advice on that. And if going into the market made sense, or if because it's possibly a year to year and a half away, the market could be down 50% you never know. Thanks so much, I'll experience on the podcast.

Well, I wouldn't look at it like you're taking the money out because you're not using the money or you don't need the money. This money is going back into an IRA, back into savings. And so you might be moving it around, types of accounts, but ultimately your time horizon is about when do you need the money for use, okay?

So that's the way I would look at it. You know, it's kind of like, you know, money in doing a Roth conversion, for example, just because you're doing that conversion. Technically, that's a distribution from your, your IRA into the, into the Roth. And, but that doesn't mean that you're using them on me. You're just.

doing a conversion locking in that tax rate, whereas in a hair diary, you're forced to take some of that money out. And so I would just be looking for a long-term time horizon, whatever that time horizon is for this money on the investment side and invest it that way.

So don't think of it like you're taking the money, you're just moving the money effectively from one type of account to another. So I would be fine investing in long term as long as your time rising is long term. Thanks for the call.

This is an InvestTalk best-of-caller questions compilation program. Your comments and questions are always welcome. Call anytime 888-99-ChART. That's 888-99-CHART.

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This is a special invest talk best of caller questions compilation program. Remember the invest talk phone lines never close. Please call with questions 888 99 chart. This is Randy the Iowa trucker again. First off, thank you so much for your show. I'm not so sure I pick it up as well as I should.

But I enjoy it and I do learn something. My question is something that I thought I understood, but not sure. Reversion to the mean. I know the stock market over time tends to go up, so the mean has to move somewhat.

If you could give a brief explanation of that, that would help. For example, again, do some companies just grind up and never revert? I'm thinking of Apple, which for me has gone up about 90% since I bought it, and Exxon, which has gone up about 200% since I bought it. I just got lucky at both of those, but they never seem to go back down except a little dip here and there. I just want to understand this better because I would like to have more of both.

but I don't know how long to wait when I should get it. I just would like to know more about the reversion to the meat. Thank you very much. Again, great show.

All right, looking at some companies with long track history and track record. And reversion of the mean just is talking about how there's an average return. I'll use the broad market, right? Say 10%, nominal return. This year equity markets were up 20%. Does that mean that they're always going to have 20%? And now that's the new average return for markets? No.

Okay, it does not mean that has to return less than 20% next year. No, you could go up another 30%. But the long-term average is around 10%. Now that's with more tame inflation and there's some complexities there. But when you get, you know, a 20% year, the next year might be flat, but then your annualized return is roughly 10% over two years, for example. And that is your can be your reversion.

to the mean. It could also be a major drop. We've had back-to-back very good years. You could have a 15% down year and still over three years have a 10% average return. That's the reversion to the mean that you don't always get above average returns. Sometimes you get below average returns in particular sectors, particular

asset classes, particular companies can have bad years. And that's just the nature of how markets work. Now, what you're talking about is you own Exxon. I don't know when you bought those, but odds are you've just bought them during an upcycle. And you usually have major downdrafts in markets every, call it five to 15 years.

in that range. And that's when you get that reversion to the mean. You get people being washed out and I call them weak hands, people that get scared, they put too much risk in their portfolio and they experience that risk. I always say, just because you didn't feel the risk doesn't mean you didn't take the risk. It's like you jumped out of an airplane.

With parachute, there's a risk there. You landed safely, but does that mean you didn't take the risk because you survived? No, you still took the risk. Okay, same thing in the stock market, right? You invested in stocks and companies and it went up. You didn't feel the risk because it went up.

Okay, you didn't feel the downside risk. But it doesn't mean you didn't take risk. And what happens in down drafts is that people that thought everything was hunky-dory, thought that their low volatility ETF was truly low volatility when it really wasn't, right? It's just lower volatility than the average equity, but the average equity is high volatility, high risk. And they suddenly felt bad and then they sell and those are the weak hands. And so that's when you get the reversion to the mean.

Okay, so don't get thrown off by one year, two years, even just a handful of years where things are going well. That is, it can continue, but it doesn't have to continue. But returns are not promised to you. Markets are not promised to you.

Okay, they are a tool that you engage with, and you take the appropriate amount of risk, and that's what we are trying to do here on a best talk, is what we try to do with our clients, is take an appropriate amount of risk for their goals, for the risk tolerance level. So when you do get that reversion to the mean, you don't get people that are panicking out their understanding of the longer term

ups and downs of investing. And if you can't handle that, then you're probably in the wrong game. Thanks for the call. I'm calling to ask about a refinance that I'm currently in the middle of. So I'm refinancing at rental property that I own. And I was wondering that you have a good bit of equity in that property. And I haven't quite been maximizing my raw contribution every year. So

But it'd be smart to take some of that equity out of my house and actually just put it into my broth IRA where I feel like it can make better returns and possibly be what my home might be able to bring in terms of equity in the future. Look forward to hearing your answer. Thanks so much. Bye.

Yeah, I wouldn't mind if you're already doing a refinancing and you're cashing some money out for whatever reason, I wouldn't mind a little bit to fund a Roth IRA. But remember, you're talking $7,000 a year, $8,000 if you were 50 didn't sound like you were 50, but $7,000 a year, it's not much to take out. I wouldn't do it specifically to fund a Roth IRA, but it does help with tax diversity when you have

I'm assuming a 401k IRA and then a Roth IRA, as well as rental properties as well. You have various options of how and when to take money out from a tax perspective and that creates that tax diversity. So yeah, I wouldn't mind that. But like I said, it's a very limited amount that you can

you can contribute to a Roth IRA, but you also have to have earned income. So don't think you can make a Roth contribution just because you have the cash. I'm not sure if you have a job, you know, earning come that way or not. Maybe you're just living off rental income, I'm not sure. But yeah, make sure you have to have earned income to make those Roth contributions. Thanks for the call.

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Can you explain the steps that had a rollover, your 401k? The symbol is U-N-I-T. Cheered in North Carolina. Listen to the show all the time. I wanted to get your thoughts on energy transfer. Ticker symbol is E-T. Let's keep things moving and play another fresh color question from 888-99 chart.

I have a general question about analyzing a company and their debt. How do you analyze a company's long-term and short-term debt? How do you know that they have too much debt on their balance sheet or their debt? Just to find out if there's any kind of space in the face of it. Looking forward to it.

So that's a great question. Because we talk a lot of times about a company's balance sheet, what's healthy, what's not healthy. And so at a high level, not all debt is bad. In fact, debt leverage within your company is what magnifies returns, right? Not all debt is bad, but not all debt is the same. You can have a company that has $100 billion in debt that has an interest coverage ratio of 30, or you can have one that's $100 billion in debt with an interest coverage ratio of what? You can have debt that is

Short-term in nature, you can have debt that is long-term in nature. A lot of the largest companies push out their debt. Decades, right? And so the interest cost on an annual basis that they're paying, well, it doesn't really affect the health of that company. And so when you look into companies' debt, first the profile matters. How much is short-term? How much is long-term? What is the interest that is actually being paid on this debt? Because that's what's going to affect year over year. And when is it maturing? Generally, companies tend to roll these things over and over.

Another is, well, when was it issued? What is the rate that affects the interest payment? But when we're talking about leverage, we're talking about how much wiggle room a company has, right? The economy is cyclical. Markets are cyclical. Everything in life is cyclical. And so when there are downturns, companies that have higher debt levels are going to struggle compared to companies that do not. And that's because the degree to which you lever a company is going to affect how much wiggle room you have in terms of what you earn versus what you have to pay to stay in business.

Now you also aren't looking at all this in isolation. A utility company is gonna carry far more debt than a video game maker, generally speaking. And so when you look at these numbers, a helpful thing to do is do a comp analysis. Look at other companies within that specific sector. Try and find companies that have the same type of products, the same type of customer basis. A lot of things in common and see how they compare.

Now, I know through a lot of information out at you, but that's just to say that there is a lot that goes into understanding the importance and understanding what it means when you're looking into a company's debt. And so hopefully that gives you a little bit of where to start because that is one of the most important aspects of a company. How is it funded? How is it capitalized? How much risk are they taking? Let's go talk to Larry here in California. We'll talk about IRA transfers as well as meta. I already think they've taken the call.

Yeah, okay. So my situation is just looking for a second opinion really. I'm 44 California. I left an old employer. It's about 200 K and the 401 K. So I'm just trying to just want an opinion on what's the best option for me. I can leave it at the employer and it's just an S&P 500 fund and you know what 10% whatever. But what I really want to do is get exposed to the stock. So I'm with Fidelity also have a Roth.

So I could convert to IRA. Of course, there's tax implications there. No, I already have a rope of fidelity. And but I could also run it over to my new employer and continue contributing what the 20 to 23 K. I'm just looking for maximum. Of course, max everybody wants maximum gains, but just really want to get into some, you know, individual positions, you know, before, you know, I know we're on this bull run. I just want to try and capitalize the force off said and done.

Yeah, well, the simple is the first thing you should do is roll it into an IRA. You have a Roth IRA. It sounds like you can you I would open up an IRA. There's no tax consequences of moving your 401k from into an IRA. It's just an IRA rollover. You can do that. There's no tax consequence. Now, if you roll it into a Roth IRA, there is. What was that? The 401k is pre tax. So if I go to the IRA,

That's real money, right? That's going to be tax says, no, no, no, no, no, no, no. Listen, listen, when you roll an IRA, sorry, roll a 401k pre-tax into a traditional IRA, there is no tax consequences. It's only when you roll it into a Roth IRA that there is tax consequences, okay? That is a Roth conversion. Now, what you can do at some point, you can convert some or all or part, you know, over time of the IRA,

into your Roth IRA. You don't have to do it all at once. It can be $5 at a time. It doesn't matter. So you can slowly do that over time. And that is that there are tax consequences there. But you definitely should not roll it into your new 401k. You 100% should roll it into a traditional IRA. Then you talk to the CPA. Maybe at some point, what we do for our clients, we run full financial plans and we say, okay, when should you convert your IRA into a Roth IRA?

and take that tax hit. And usually it's slowly over time, usually it's between retirements and taking Social Security, et cetera. So those are things that you want to talk to a financial advisor about. You can talk to us about, we can help you with this. We use Schwab, your infidelity. Both are good. But 100% roll your 401K into a traditional IRA. There are zero tax consequences with that, zero.

Like the new company 401k, why not just roll it over to that? Because you're limited. You said you wanted to buy individual stocks, right? Correct, correct. With an IRA, you can buy whatever you can buy mutual funds. You can buy ETFs. You can buy individual stocks. You can buy individual bonds. You can buy whatever you want, right? And in addition, what people don't realize is that most 401ks, there are investment options, your mutual funds, and those have fees within them.

But then there are actual plan fees as well. And some, it depends on the employer. Some employers pay for it all, all those plan fees. But a lot of employers share or put the burden entirely on the employees and spreads the costs of running the 401k plan on the employees. And so I don't know, you know, what that is with your current employer or previous employer. But that's why it's usually makes sense to

roll those 401ks into an IRA. You still contribute to your, you know, it's your new company, you get the company match and all that. If you ever leave again, you roll that 401k into your IRA again. So going over to that, you say, I rolled it over, but, you know, what if I still want to say, not, not liquid, but I want it in that IRA that's locked in into retirement. I qualify for pension. So I'm going to have something at the end of the road as well.

But I, I, you know, I was thinking maybe a broker to come maybe more appropriate. Well, when you, whenever you take the money out of the IRA, that's taxable. Okay. When you take the money out of 401k out of an IRA, that's a tax event. Do you want to take that tax event? Okay. You have a Roth. Now you can take the contributions of your Roth out at any time. That's where your liquidity comes from.

So if you want to contribute more above that and open up a brokerage account, that's fine. But just roll it into an IRA and then start contributing to your new or get rid of the old one. I need that. Thanks for the call.

You are listening to an invest talk, best of caller questions compilation program. Your comments and questions are always welcome. Call anytime, 888-99-SHART. That's 888-99-CHART.

This is an invest talk best of caller questions compilation program. Your comments and questions are always welcome. Call anytime 888-99-SHART. That's 888-99-CHART. I have a question about bond. If I were holding some longer term bonds, whether they be treasuries or corporate bonds, and when interest rates start going back down,

assuming that the bond value increases. How do you decide when to sell the bond? Like, how much would it need to increase versus holding on to the bond to maturity and just collecting the coupon? Yeah, I'm just trying to figure out when interest rates start falling, if it's better to sell the bond and choose that's worth something else or keep a hold on to it. Look forward to hearing your advice on the show. Thank you.

I think the answer to that question depends. So the question was essentially, you're holding as interest rates fall, generally speaking, the price of the existing bond is going to move up. And the reason why it moves up is because, well, now newly issued bonds are generally going to have lower interest rates than on the run bonds from last week. Those newly issued bonds from last week is example.

But I think that the core of it is why are you invested in these bonds, right? If you invested in this bond as some sort of liability or liability matching strategy, then you wouldn't want to really sell these bonds, right? You want to hold it for the coupon and hold it for maturity. If you're looking for broader capital growth,

Then probably you're going to want to start divesting from some of these bonds and moving it into equities because historically over time equities out perform bonds. So I think the core of the question is, good job. You understand generally what the dynamic is between interest rates and current bond prices. But really it is a personal circumstance explanation for why you bought those bonds in the first place and how else you might use that capital to either invest in maybe some

undervalued bonds that have more beneficial characteristics or equities broadly for that capital growth. Thanks for the call. I've been listening to your podcast for a little while now and I'm a new advisor out of North Carolina and I was just calling to see what are some of the market topics you're having conversations with clients and potential clients as to why it's important right now to partner with a professional or switch over from doing their own investing to working with somebody

regarding the situations happening today in the world. Thank you so much and you guys have been so great. Have a great day. Well, thanks for listening and congratulations on joining us advisors. And you know, I think here's the thing, right? The topics that we were talking about with our clients are the exact same things we say and discuss for our listeners. And the whole thing here is that there is a lot

that is going on. There is a lot that is changing from a macro perspective, political perspective, a lot of things going on. And so the biggest benefit to you in having a financial advisor and that is what you can tell your prospects and your clients. And because it's true, this is true. I fully believe this. Life is far too short and too complex for people who are also working and other jobs outside of the finance industry who want to spend time with their families to keep track of everything they need to keep track of, to create the best, most efficient

financial picture in order to achieve their financial goals. And so that's the job of a financial advisor, not just to help them with their investment strategies, but honestly to hold their hand because we have experienced over the past two years a historic run up in equity markets, right? But it's not always going to be glossy. And so the primary job is to keep your clients focused on why you're doing what you're doing and to help them achieve their financial goals and give them the peace of mind that they can do the other things in life that they enjoy.

while you're devoted to their financial future.

So for those of you who do not know what a drip is, a drip stands for Dividend Reinvestment Plains. And essentially what happens when a company gives you a dividend in cash is you can elect to automatically reinvest those dividends in shares. Now, why might you want to do that? Well, it happens faster.

Rather than waiting for the cash to get through your brokerage account and to your brokerage account, you can spend it. If you're gonna buy the same shares already with those dividends, well, then you would probably just wanna use that dividend reinvestment plan. Another thing that is beneficial of it, well, it's automatic. Again, if your intent is to continue to reinvest dividends from a company and those companies shares, then it makes sense to just use drips because they're automatic, they're faster. You can just set it and forget.

But the problem here may be that if you have drips in this case, where you have 30 to 35 stocks, have those dividend reinvestment plans to five don't, well, then here's the downside, right? You could get out of balance. And so in this situation,

I think it really depends how balanced your portfolio is. If you intend to buy those shares, no problem in using the drips because, again, it's automatic and it's faster. You get the benefit of compounding faster. But oftentimes things get out of whack, things get out of balance. It may make more sense if you're the type of person that wants more control, has a more active than passive portfolio to rather than use the drip to take the cash instead. Thanks for the call.

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