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 888 99 CH ART. They will be played and answered on an upcoming invest talk podcast. This is Glenn in San Francisco. I'm a relatively new listener, but learning a lot. So thanks for what you're doing.
My question is about trend following. If I'm following a stock and it starts to move up above its 200 day moving average, what strategy do you recommend if I'm looking to buy that stock or ETF? Do I jump on it right away? Do I wait a few days, make sure it maintains that level? Do I look at other indicators? What's your recommendation there? Look forward to hearing the answer. Thank you. This is a tough one because it's not.
A simple answer, you know, this is the turn to moving average is the standard long term moving average that kind of marks that the price trend is higher over the last year. You have roughly 200 days in a calendar year when it comes to trading and a little bit more. Yeah, I understand that. But 200 is kind of that standard number.
I like to look at it more like if it closes multiple weeks above the 200 day. So I would probably wait for that. And I would also make sure that it's both above all the major moving averages. I'm talking the 100 and the 200 as well.
Because what can happen is a stock can be very choppy. It can move above the 200, but it could be still below the 50 or the 100 day, depending on, you know, kind of how the price movement works out. I liked the 100, I liked the 200, but I really, frankly, the 100 day to me is the one, if you're trying to be a trend follower, the one that makes the most sense.
for most positions 200 is a little slow and the 100 has a little bit more typically sticks with six with the most trends stay above the 50 or the 100 so I would focus on those two and just look at like GLD right now the gold gold price this moved above the 100 a moving average in October of 2023 so about a year ago
And it's been an uptrend ever since, and it's held. It's hit the 100-day moving average three times since then, and it bounced right off of it. And so as long as it stays above that, the trend is in place. If you're trying to be a trend follower, that's a much better one to take a look at and adhere to. Because the 200-day, that one, it can be all over the place, depending on how the chart pattern looks.
So I would focus on the 100-day over the 200. Now let's keep things moving forward and pivot back to the Invest Talk Voice Bank, 888-99 chart. I'm wondering what the difference between return on equity and return on assets is, and if I'm evaluating an equity company, I'm not a read, which one is more appropriate for use? Love the show. Thanks for all the help, guys.
So return on assets ROA, as it is commonly abbreviated, essentially measures profitability relative to the total assets of a company. So it shows how efficiently a company is converting its asset base into revenue. Now return on equity, which is ROE, it measures profitability relative to shareholder equity. So it is essentially saying what returns are generated for equity investors.
So again, the key difference here is ROA focuses on asset efficiency, whereas ROE really emphasizes shareholder returns. And so if you are trying to be an equity investor, well, generally, you're probably more concerned with return on equity, right? How is it efficiently and directly relating to investors, shareholders?
But as we try to stress, as I try to stress all the time, there is no one metric that tells you if a company is good, right? If a company is the right company, they're all sorts of things you need to see. And so just because you're an equity shareholder, certainly does not mean you should be ignoring growth in return on assets.
of the company as a whole.
The Investalk Radio program and its podcast replays. The new online training experience, Investalk Academy and the KTP Premium newsletter distributed to subscribers each Friday. Learn more anytime at investalk.com. The phone lines are open now and you can call with your questions 888-99-ChART.
I just want to ask you a question. I retired early and I'm now enjoying life abroad and the building with my family. I'm in my 40s and exploring ways to generate passive income. I'm particularly interested in quant investing and wanting to get your take on it. You think it's a viable way to create consistent passive income? Understand there's a deep learning curve, but I'm ready to put in the effort. If you have any advice, resources, or key things to watch out for,
As I begin the journey, I greatly appreciate it. Thanks again for all the great work that you do. All right, so he's talking about is quant investing. You're basically using numbers and investing completely based on the numbers. Here's the issue is that quant investing has been around for a long time. The most famous one is the long term capital management and that blew up in 1998.
And quants investing is just what's going to be using numbers and no emotions, know what I call qualitative analysis in order to make your decision. You know, for a good example is right now qualitative analysis is extremely important. Why is that? Because
If you're just using the numbers, you're ignoring this new administration that's going to come in, probably make a lot of changes to the way the economy is run, the way different departments are run, how the way regulations are applied and rolled out. And if you're just looking at the numbers, you're ignoring all of that. You know, it can be a part, it's part of our process, right, is understanding the numbers.
But to us, it's just one piece of the puzzle. And you're also, it's very broad, right? What do you mean by quant investing? It's too broad of a term for me to say yes or no. It depends on the strategy you're applying, as well as, you know, is this the only way you invest?
Probably not. It could be part of your strategy. It could be a certain portfolio you're running with a certain algorithm or certain quantitative analysis. That's fine. But to say, this is all I'm going to do. A, it's too reliant on just the numbers. And B, you're not giving me any context here. What algorithm are you talking about?
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.
on radio, on YouTube, streaming live on at Vestalk.com. My question today is about HME Equipment Services Inc. And for our podcast subscribers, if you're willing to take the risk, invest talk. If you're OK with that risk, with host and financial advisor Justin Klein and that volatility, go for it. And co-host and portfolio manager, Luke Guerrero.
This company has fallen like a rock. It's down 52%. Invest on. Everybody wants a secure financial future. Richard, you have a question about TOL. But getting there takes strategy, discipline, and the right information.
I wonder what you think of the price of it. Go to Chris in Maine looking at IEX. Hey Justin, I own it. Just seeing what you thought of it. Invest Talk is made better by listener contributions. So don't forget to call 888-99.
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. I prefer lower risk investments. Most of my investments and fix things come with a large part of this being in treasuries, mostly short term, three to one year. Because of the debt set and I'm concerned that I have too much exposure in treasuries, if I should be selling some of my treasuries.
any help or guidance will be helpful. Thank you. Well, that's hard to really say unless you, I see your whole portfolio. This is what we do at our portfolio reviews. Look at, you know, the exposure to treasury is compared to, you know, your broader goals, risk tolerance level. You know, you say your relatively conservative, you know, this is something we try to balance out with our clients now is that so many people have PTSD from O8. They think this big deflationary bust is going to happen again. And
You know, to us, it's pretty clear that governments are not going to allow that they're going to spend. They're going to create accommodations that fed in charge. You're going to take trade, create alphabet soup of.
programs in order to paper over any issues like the Silicon Valley Bank crisis, et cetera. And really the risk is actually to the upside, meaning inflationary upward spiral versus some sort of big deflationary downward spiral like, oh, wait, okay. And so when you're in treasuries and very conservative investments, you have a risk of inflation eating away at your overall return.
There's certainly some balance that needs to be had there. Now, it's not saying you go with treasuries all the way to equities, but do you take a step up in risk to corporate bonds, for example, and get a little bit extra yield and try to get above that inflation rate? These are discussions to be had. Now, I like that you're focused at least in your buying treasuries in the
shorter term, right? One to three years. Now three years is creeping into the intermediate term, but you know, you know, you're not buying 10, 15, 20 year treasuries, right? So that's certainly a positive. I like that you're thinking about this, but this is a better discussion more for portfolio review. And that's why I encourage you to head over to invest doc and schedule one of those. It's good to George from San Mateo who has a question about index funds. How can I help you? I'm a passive index fund investor.
And I would like to ask if you had to choose between a large cap index fund or a total market index fund, which would you choose? An example would be like Vanguard's VV or VTI, total market index fund.
Yeah, that's a great question. If I had to choose doing a large cap and a total market index fund, put simply, I would choose the total market index fund. And the reason why is because empirically, right? Maybe not the past five years, but empirically speaking, what you tend to see is small and mid caps tend to outperform large caps. The reasons why is because investing is a risk return thing, right? And you're taking on larger risks with investing in small caps that have higher, you know, capital requirements that have higher debt levels that have, or I'm sorry, higher costs of capital.
And so investors over the long term tend to get rewarded for taking on those risks. It also just gives you broader exposure to a lot more potentially exciting areas of the market. And if you're talking about the funds you're talking about, you can do it at a relatively low cost. And so I think that investing in a total market index gives you that exposure that the large cap index just does not.
Thanks for the call. Got a question for Justin or Luke? I've heard you say multiple times that you prefer a shorter duration treasury barn. You're the best person to ask it. Can you explain to me why it is more advisable? The symbol is you and IT. Wondering what you thought about this read if it would be a good time to get in. Invest Talk is ready 24-7.
So I was thinking, 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? I just wanted to ask you about one stock that I'm looking at, Inter-G-E-T-R. If you could run that down for me. Don't forget to call, Invest Talk 888-99-SHART. Let's keep things moving. Play another listener question now. This came in earlier from Missouri. This is Chris calling from Missouri. I just had a quick question about
money market funds. I currently have a fund through Vanguard with a large sum of cash that's in the money market fund. You just have that readily available to make any purchases of stocks and other securities. But I guess my question is, should I be concerned
with the amount that I have being insured by SIPIC because the fund itself is not insured by FDIC. It's probably close to a quarter million dollars. So I just want to make sure that the money is safe with Vanguard. I really appreciate it. Thanks again.
That's a great question. So for those of you who don't know, SIPIC S.I. PC, which stands for the Securities Investor Protection Corporation, what they do is they kind of act like the FDIC, but for these brokerage accounts where they cover up to $500,000 per customer, including a $250,000 limit for cash. And the reason why is well, they have insurance in case the brokerage firm fails.
Now, it doesn't cover for losses, right? If the market goes down, it's not going to cover you for your loss, but it's mainly if the entity that is your brokerage firm fails.
Now, in this instance, what you're talking about is a money market fund. And money market funds tend to not lose value. That's the whole point, right? When the nav drops below $1 per share, it's called breaking the buck. That means things are probably really bad. The last time that happened was during the 2008 financial crisis. And so in this situation, with the amount of money you have, which should be below the threshold that is being covered by SIPIC, you should be fine. I've always said, when you have situations where you have money in a Vanguard money market fund,
If the fund is compromised, if Vanguard's fund is compromised, a money market fund investing in incredibly safe securities for one of the largest asset managers on planet Earth, if that specific fund is compromised, we probably have a lot worse things to worry about. Generally speaking, civic is going to cover you there so you should be good to keep in that fund. Yes, it is a good idea to keep things in a mining market fund as you wait to invest them in the market at opportune times.
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You are listening to an invest talk, vest of caller questions compilation program. Your comments and questions are always welcome. Call anytime 888-99-chart. That's 888-99-C-H-A-R-T. Let's keep things moving right now with the question on 401Ks. My question is about 401Ks. And my 401K, as far as I know,
I can withdraw penalty free at 59 and a half. So my question is, if I would happen to pass away before 59 and a half, when does my beneficiary or my family get to access that money penalty free? Is it when I would have been 59 and a half or is it when they are 59 and a half or do they not get to access it penalty free or what? So that's my question.
and thank you. I'll listen to it on the podcast.
your friend who's looking after your dog. Well, the beneficiary can access those funds immediately. There are tax implications, distributions from those funds or taxes, ordinary income. But what they will do is they're going to avoid that 10% early withdrawal penalty that you would have to pay if you were to draw down on this.
So then what are your options for taking this money? Well, your beneficiary could take a lump sum. They could roll funds into an inherited IRA, or they could use a tenure distribution rule for most non-spouse beneficiaries. Now, if your beneficiary is your spouse, they can roll over their 401k into their own retirement account. And they can delay those distributions. So the key here is to understand that there are different rules that apply to you versus your beneficiaries. But more importantly, there's actually different rules depending on who the beneficiary
for their 401k is. Excellent question. Thanks for the call. Now let's play another question for you now. Hello, this is Randy, the truck driver from Iowa. Now I'm in Illinois today. I have a question some time back all year or two ago. I heard you talk about dividend reinvesting and that rather than let it just let the dividends go back into the company for reinvestment to hold it in your sweep account
and therefore you could choose where you wanted it to go. I'm curious, is that still how you feel or is it better to just let it be reinvested back into the company? You have a great show. I have learned a whole bunch, even though I still don't know hardly anything. Thank you very much and keep up the good work.
appreciate your call. And the answer to your question is it's mixed because how we do it, we take the cash into the sweep account as opposed to reinvesting in the stock. But we are looking at our strategies in our client accounts daily. So we're very hands-on, we're looking for opportunities and we want that cash available when those opportunities present themselves because most of our strategies have anywhere from
25 to 40 different names, and one might pay a dividend, and this other one might have pulled back to a good buy point. We want to redeploy some of that cash in this other name that we think has better opportunities today versus, you know, when you do a direct dividend reinvestment plan.
You're automatically putting the money in when it pays the dividend. It might be a good time. It might be a bad time. You don't know exactly. So we rather have a bit more control. Now, if you aren't on top of it regularly, then maybe doing the drip makes sense because you're not really actively finding the right time to get into to deploy that cash. Okay. So it depends on what type of investor you really are.
A quick reminder, if there's a term that you hear mentioned on the program, but you're unclear about what it means or you have a question about it, we want you to ask. It's very likely that you're not the only one with that same question. 888-99 chart. This is James from New York. I just have a question about shorting the stock versus buying puts on the stock. I know that both bearish sentiment
But what is the fundamental difference between these two and why would someone do one versus the other? Which one is more profitable? Which one is more risky?
Um, just wanted to understand this more. Thank you so much. Have a great day. You know, that's a great question, right? Because both shorting a stock and buying a put is essentially having a bearish opinion on something because you get profit when the stock price goes down. So what is a short? Well, short is when you borrow shares and you sell them at the current level, right? So you sell them at $100.
And your goal is you believe the stock price is going down. So at some point, you have to buy it back because you're just borrowing it. You don't get to keep it forever. At some point, somebody's going to call it back or you're going to want to close the position. And so you want to buy it back at a lower price, right? So maybe it goes down to 90, then you make $10.
When you buy a put, it's an option on a stock. You're buying the right, but not the obligation to sell a stock at a set price. So if you buy a put with a strike price of $100, then you have the right to sell it $100. So you hope the price goes down so that you can go to the market, buy it for 90, and sell it for $100. But what are the risks here? Well, if you're buying a put, say it costs you $2, what do you stand to lose? Right? You're not obligated.
to sell the shares. So really, all you stand to lose is the cost of buying the put. What about shorting? Well, if you borrowed a stock and sold it for $100, you have an obligation. At some point, you have to return those shares, which means that if the stock price goes to a million,
You're in a lot of trouble. So your loss is, your potential losses are unlimited, right? So shorting is far riskier. There's unlimited potential losses there, whereas puts, well, the losses are minimized. Another thing, another benefit is, well, puts you can, they put a lot of leverage, but the core thing here is understand the risks of what you're doing when you're trying to
enact your vision of where you think a price or where you think a stock price is going.
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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. Hi, let's talk. Also, can you guys provide more background data? I'm running a public call. I see mixed things when I go online and do some issues myself. I see that in the long run, it can provide less volatility overall.
and even slightly higher returns. But I've also seen how it can provide less returns. And I'm not sure if that's just in the short term. I'm also curious if the statements I've already set apply to cover calls on an index like the S&P where you get different performance if you were doing it on individual stocks.
Now you guys obviously run covered calls for your clients. So I'm also curious if this is something more for people who are closer to retirement, it sounds like that too. You guys run the strategy for it. You might find yourself just curious what you guys think on that as well, not with something, Michelle. Thank you.
I love this question because it cover calls have become a very popular strategy. And there's a lot of ETFs that are out there running these cover calls. And it might look like they have huge dividends and things like that. And a lot of people see this as a panacea. It sounds great in many ways it is, but it's not a panacea. It's not a perfect strategy, just like nothing's a perfect strategy, right? What you said at the beginning though is correct. It lowers risk and over time has
typically slightly better returns. Now, it depends on what you're talking about, but that's generally the case. But that's over longer periods. And what that tells you is that you have better risk adjusted returns, better risk adjusted returns. And that's how you have to always think about everything. It's not total return. It's what type of risk that you're taking to get that return, because every asset class or strategy has certain level of volatility. And some people can handle that volatility and some people can't.
If you're in a strategy that does very well long term, but it's very high volatility and you get out because during one of those bouts of volatility because you just freak out, you can't handle it, then it doesn't matter what that long term return is because you're not going to capture it. You see that in fun flows and how much of
how much of the mutual fund returns investors actually get versus the total return of those funds, for example. Another one of the ways to think about it, it's okay, how do I lower my overall risk, but still get market-like or better returns, and therefore I'm getting much better risk-adjusted returns, right? Because if you can get the same return, but with lower volatility, everyone's going to take that. And in many instances, that's kind of what cover calls really bring you.
Now, you're right, at times, it can't underperform, especially trending markets. And this year, obviously, has been a very trending market, very, very top-heavy market, et cetera. And it can limit the limit gains in really, really good years.
But more often than not, most years are not these amazing, consistently trending higher years like we've seen for the last two years. You typically get choppier environments and more bouts of volatility. And in those instances, you get a much better performance from a cover call type of strategy. For example, I'll give you an example. 2022, S&P was dominating these ground numbers roughly. SP was down about 20%. NASDAQ was around 33%.
If you go look at most covered call strategies, they were down single digits or so ours was down low single digits for most clients. You say, well, that's one year, but you avoid major drawdowns. And for a lot of people, especially pre retirees, retirees, that is very attractive. But then good years, you might not get the full return of the market.
But remember that I always use the math. If you don't have 33%, you have to go up 50% to get back to even. Let me repeat that. You're down 33%. You have to then go back up 50% to get back to even.
Now a lot of people, you know, they're okay with that type of volatility and they know over time, you know, it's going to get come back and you're going to have eventually higher long-term returns. But that's not always the case, right? And so cover calls, they sound like this great thing as a concept. And in practice, they're good if executed well, but they're not a panacea.
And it can be better to buy individual stocks, but it also can be better to do it on index. It depends on the subset of individual stocks and their performance. It's not, I can't make a blanket statement because I don't know what subset of stocks you're talking about. I know that was kind of a long answer, but hopefully it gave you a good understanding of how to think about cover call strategy.
Now, we got time to drop another question from our invest talk YouTube channel. This one from our friend Jim Leahy, about international and emerging market stocks. It says, as a general rule of thumb, what percentage would you recommend to allocate to international and emerging market stocks? And this is a good question because given the recent performance of the US stock market versus international and emerging markets,
You tend to see investors exhibit more and more something that we refer to in the US, if you're a US investor, as home bias, meaning you tend to overweight your home country stocks more than what you'd expect in a well-diversified portfolio.
Now, as of early 2024, the US stock market was about 45%, 42% to 45% of the overall market. But a lot of people in the US have 100% of their stock exposure in the United States. So generally, again, it depends because the reason why the expected return of international emerging stocks is different in the US is because the risks are different.
are merging markets tend to be the most risky. And so if you are a risk-averse investor, well, maybe you don't want anything in there. But generally, I think 5% to 10% is good. For international stocks, well, those returns tend to be more similar to the US market, is in the developed market. And so maybe you want a 20% to 30% allocation to that.
But I think it's important because just because in the recent past, the US has outperformed doesn't mean that will continue forever. And that is the benefit of diversification. You diversify across companies, you diversify across sectors. It's even a good idea to diversify across market type. But as always, this doesn't fit every investor. It's important to take into consideration your risk tolerance, your investment horizon, and what your ultimate goals are.
on radio, on YouTube, streaming live on at Vestalk.com. My question today is about HME Equipment Services Inc. And for our podcast subscribers, if you're willing to take the risk, invest talk. If you're OK with that risk, with host and financial advisor Justin Klein and that volatility, go for it. And co-host and portfolio manager Luke Guerrero.
This company has fallen like a rock. It's down 52%. Invest talk. Everybody wants a secure financial future. Richard, you have a question about TOL. But getting there takes strategy, discipline, and the right information.
I wonder what you think of the price of it. Go to Chris in Maine, looking at IEX. Hey, Justin, I own it. Just seeing what you thought of it. Invest Talk is made better by listener contributions. So don't forget to call 888-99 chart. I was wondering if you have a portfolio around like 35 stocks and like 30 of them are enrolled in drip. Do you recommend keeping stocks in drip or
taking the cash dividend and purchasing additional shares as you go along. Thanks. And thanks for all you guys do. So for those of you who do not know what a drip is, a drip stands for dividend reinvestment planes. 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 going to buy the same shares already with those dividends, well, then you would probably just want to 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 in those company's 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, the 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. Let's keep things moving and swing back to the Best Doc Voice Bank at 888.99 chart.
I just had a simple question about how best to analyze an ETF to decide whether or not to buy. I get some of the ratios you want to look at for individual companies, but some of them don't directly apply. So I'm wondering what translates and what doesn't into analyzing an ETF would love to. You guys answer. Look forward to it. That's a great question. It's very different than analyzing individual company. Now,
broad risk and things like that. That's pretty similar, buying a large cap fund. It's going to be similar to a large cap stock and small cap, et cetera. But these ETFs, and there's a lot of different types of ETFs. You have ETFs that buy just equities. Others that buy just bonds. Others that buy both. Others that cover call strategies. Others that run commodity type strategies. There is just so much out there. First off, you have to understand what asset slice you are investing in.
For simplicity's sake, I'll just use equity ETFs because these are tend to be the most popular. The first thing you want to look at is the expense ratio. Okay, so what what kind of costs are you? Are you paying when you're when you're owning that ETF? Some of them are very low, but there can be ones that are high as well. Then you go to the type of risk historically that it has, you know, volatility is an aggressive, moderate conservative.
et cetera. And then you're looking at once again, a risk adjusted return. So things like the alpha, the sharp ratio, standard deviation, those and comparing them to others that you're looking at. And then I want to look at the portfolio composition, what sector weightings are they? Is it overweight in one particular type of company or one particular company?
or a couple companies. A famous example is like XLE, which is the energy ETF. Those are very top-heavy, and that one's very top-heavy with Exxon and Chevron.
And so you have high concentration in those two names. So what's the concentration within the portfolio? And then the quality of the names, the financial health, the profitability, the growth, et cetera, return on, invest the capital, all these things that you can find over at Morningstar. There's other avenues to gather this data as well. So those are the ways to look at it. And then how does that fit your overall portfolio? What type of other
exposure to you have within this space of a lot of overlapping positions. So if you own a tech ETF, for example, but then you own the spy, well, you're going to own a lot of tech in the S&P100 with the spy, because it's all Apple, Microsoft, NVIDIA, Amazon, Meta, Tesla, Alphabet, Broadcom. Those are the top nine names. And so you're, there's a lot of overlap there. So you have to think about it in context to your overall portfolio waiting.
It's a very different way to look at these type of funds. And I'm glad you're asking that question because the ETFs can be a good fit for a lot of people, but it's not fit for everybody. The prosperous future you envision for yourself and your family will not happen without strategic planning and definitive action. Let's go to Brian and San Mateo looking at Roku.
And I wanted your take on the technical picture. For the unprepared investor, market volatility around the world demonstrates risk, but opportunities wait for no one. And now, maybe the best time in years to invest wisely, to invest strategically. What I would do is keep saving and look for other opportunities. But how can you decide what sector is to avoid, which stocks to buy, and what might be the best price point?
I'm new to investing in my friend Wesley, you recommend your podcast a year ago. And how should you deal with your risk tolerance? Invest Talk. To prevail, serious investors need a balanced combination of realistic market education and unbiased guidance. A unique weekday finance and investment program and podcast. Invest Talk. This is Joel calling in from Maine. I love the show.
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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. Keep things moving and roll in another listener question now. John here from Lakeland, Florida. My question is that is it better to take a loss and sell the stock before it goes to zero? Or is it better to allow the stock to go to zero?
or does it really matter either way? Just trying to figure out the best way to recoup as much of my losses on these stocks as possible. I hope I made some sense here. Look forward to hearing your insight. Appreciate you guys. That's a good question because I think oftentimes people get a little bit confused about the benefits of tax loss harvesting, right?
And so yes, if you were to wait until a stock goes to zero, you could write that off as a bigger loss. And you would have bigger losses that can offset your gains for tax purposes. But I think we all agree that taxes should be the secondary concern. The primary concern should be, in this case, preserving your money, right? It doesn't do you much good if your
brokerage account goes down to zero, but now you got a million dollars and losses, losses for what? And so if you have a situation where you have a stock that you don't believe in anymore, that the things that got you to believe your investment thesis have changed, that for any reason other than taxes, you're going to want to sell.
Don't wait to sell it because the losses could become greater, right? Our primary concern as investors is growing money. And in order to grow money, you need to still have money. So if you're thinking to sell in this name, don't wait until the loss goes down to zero. Get out of it now. Take the loss now, have it offset whatever, you know, whatever it can in terms of the gains that you've had this year. But either way, no, I do not ever advise waiting for it to go down to zero.
InvestTalk is ready 24-7 for your finance and investment questions. I'm hoping you'll give me your take on format technology, O-R-A. 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? Don't forget to call InvestTalk 888-99-CHART.
You are listening to an Invest Talk Best of Color Questions compilation program. Your comments and questions are always welcome. Call anytime 888-99-ChART. 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 chart. That's 888 99 CHRT. I have a question about IRA account. If I was what I opened it, I put a thousand in for the first five years each year, a thousand. At the end of five years, will I be able to pull out the
the full 5,000 or just that first thousand initial, I guess, positive. I know you got to wait five years. I don't know if the account has given five years or the money that you had put in. Do you have to wait five years to pull that out? Hope you understand the question. Thank you.
I do understand the question and from my understanding, it is the full 5000. The couch has to be established for over five years and then you can take out the contributions to a Roth at any time penalty free. Thanks for the call.
Now, as we've mentioned from time to time, our podcast is available in video form over on the Investock YouTube channel. Just head over there and search Investock with two T's. And while you're watching our video and you're looking at our charts and looking at our faces, if you have a question that pops up into your head,
You know what, there's a leave it right there in the comment section, and we will get to the O's as soon as we possibly can. This one coming in from user GSG2, and it's a question about small caps and says, since the election, small caps have been doing great. I still think inflation may go higher, and these indebted small caps may go lower next year. But in the short term, what is your view on small caps? Maybe even.
if it's just as momentum. Well, I think momentum's there. I think the reason why small caps tend to do may do better in the next year. Sure, they could be hit by higher borrowing costs. A lot of the policy of the next Trump administration may be inflationary, right? It may increase input costs. It may lead to consumers having to spend more. It may lead to more restrictive monetary policy. The thing this small caps really benefit from is deregulation and corporate tax breaks, right?
And so with that on the horizon, with that being the key indicator of what may come in the second Trump administration, I've been saying for a while, right, if you want any indication of what's likely to be the focus of economic policy in Trump 2.0, look to Trump 1.0. A lot of that was focused on deregulation and cut of corporate tax rates. So small caps tend to benefit from that type of thing. And so because of that, you've seen this drive of small caps higher and they have been lagging over the past year or so. And so with that in mind, the question is, okay, how sustainable is that going forward?
I think certainly in the near term, you do have some momentum that's going to elevate equity valuations broadly, heading into the end of the year. You have positive seasonality that's really in your benefit. You have a market that is broadly higher and thus isn't going to be pushed downward by continued tax loss selling because a lot of funds are not really at losses.
broadly. And so I think a lot of that is going to float, not just the equity markets, but small caps heading into the short and medium term. So you may see this continued rotation into names that have historically, or rather over the past year or so, not done poorly, but underperform some of those larger tech names. Thanks for watching. And thank you for leaving your comment, the invest stock YouTube comment section.
My name is Tophie. I'm calling from North Carolina Field, New Jersey. I had a question regarding transferring my physicians, if possible, from Robin Hood to want to move on to something better, maybe Schwab. If you can tell me how I can do that, there's a way to, you know, transfer my physicians. If not, what are some things that I need to watch out for as far as, you know, maybe capital gains taxes or anything like that goes? Love your podcast. Thank you for your help.
This is a great question. It's actually something I wanted to talk about on there, because I have a friend who's pretty green to the investment world. He trades on Robinhood, and I have friends that love me investment questions on a regular basis. He sent me a screenshot of something, and I said, why are you a Robinhood? Why aren't you transferring? So why don't want to pay the taxes?
And I think this is something I didn't understand that a lot of people don't know is that just because you move brokers does not mean that you have to pay taxes on the individual securities on a taxable brokerage account. The industry standard is, is you submit what is called an ACAT transfer form. You open up an account, this is what we do with clients all the time, is
We help them open the account. We use TD Ameritrade as our broker, but this applies to any of the major brokerage firms. And submit what is called an ACAT transfer form, which has the information on the counterbroker, where the assets are being held currently with the account number. And then it's up to that broker to deliver
the funds, the cash, as well as the securities within the account, whether that's ETFs, mutual funds, individual stocks, bonds, et cetera, to that new brokerage firm. And they also deliver the cost basis, say, hey, this is what it was bought at. And so that the new broker also knows the cost basis as well. And then for any tax reporting, they know how to report the IRS. Hey, this is purchased at this price, sold at this price, et cetera.
So there's no tax consequences at all that assets just move in kind over to that new brokerage firm. So don't worry, Schwab or TD or Fidelity, whoever you're opening that account with is going to help you walk you through that process and they'll submit that on your behalf the same way we do for our clients. So don't think that you have to automatically take capital gains because you move when one brokerage firm to another and I always encourage everybody to move
out of Robinhood into a bigger brokerage firm. Investalk is a trademark of KPP financial. Because of the nature of the interactive dialogue inherent in the format of this program, it's important for the listener to understand that not all comments made will apply to them. Specifically, nothing said shall be taken to be investment advice.
or shall statements on this program be considered an offer to buy or sell security. Because such advice is rendered solely on an individual basis and at times will require that the investor review a prospectus before investing. InvestTalk is a copyrighted program of Klein, Pavliss, and Peasley Financial, a registered investment advisor firm which retains all rights. For more information regarding KPP's investment advisors, call 1-800-557-5461.
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