#238 – 5 Powerful Portfolio Diversification Strategies to Reduce Market Anxiety + The Army Of American Productivity

Wes Moss [00:00:49]:
We’re going to talk about the army of American productivity. It’s one of the things that kind of drives, we don’t really see it on a day to day basis, but it drives the world, it drives our retirement accounts and it’s kind of what motivates us. So I wanted, that’s kind of the first topic. And then I also want to go over, it may sound almost elementary if we talk about diversification. Everybody knows we’re supposed to do that, but a lot of us will diversify and then over time we get less and less diversified because the market kind of draws us into what’s really working. And in 2025, we’ve had some events that have really shaken some of the areas of the market and it reminds us just how, how important diversification is. So those are two really important topics that kind of tie together today.

Krista Dibias [00:01:33]:
Awesome. And I do have some great questions for you too.

Wes Moss [00:01:37]:
Can I talk about army of American Productivity?

Krista Dibias [00:01:38]:
Absolutely, yes.

Wes Moss [00:01:39]:
It’s kind of ironic because this to talk about the army of American productivity because the shock was technically from a Chinese company. But it still matters and it still makes sense of what to me, this underlying tide and the short story on Army Native American productivity is that there’s got to be something, some underlying current or tide almost like this gravitational force in the United States that just keep it makes us more and more productive. And that force is, I think this. You can’t see it, but it’s there and it’s happening 24 7, 365. And it drives innovation, it drives lower costs, it drives standard of living. And then ultimately that drives the economy and drives the market and it drives companies to just get a little bit better every single day, every single year. And then you end up with bigger, more earnings and you end up with a rising stock market. So I’ve thought about this for many years now of what is it that drives the U.S.

Wes Moss [00:02:40]:
economy that ultimately powers our retirement accounts. It’s gotta be something. And there’s a Gallup poll, Gallup does a great job of studying, like, the sentiment, how we feel about our jobs. And there’s a poll that. And they’ve. They do this year over year over year. So this isn’t new. That as much as Krista may love her job and as much as I may love my job, only about 31% of people really love their job.

Krista Dibias [00:03:04]:
That’s brutal.

Wes Moss [00:03:05]:
It’s just not a lot. So let’s call. That’s not even a third. It means 69%. Call it almost 70% of Americans, they really don’t like working. They don’t. It’s not that they hate to work, but they don’t necessarily like their job. They’re not finding purpose from it.

Wes Moss [00:03:21]:
So. Okay, well, if 70% of America doesn’t really. They’re not excited. They still go to work. We still have this super productive workforce. But I think it comes down to three categories. So most people don’t love their jobs, but there’s still three things that drive us. For a lot of that group, there is.

Wes Moss [00:03:40]:
Well, here are the three things. Fear drives us, optimism drives us, and then purpose drives us. Those are the three categories. So the first one is fear. Well, you may not like work, or you may have liked work, but you don’t love your company anymore. And you’ve been there for 25 years and you’re just ready to get out of there. You’re still getting up every day with the fear of a. Not be able to make pay the bills, not being able to pay the mortgage, not being able to pay for the kids, not being able to save for retirement, not having enough retirement money.

Wes Moss [00:04:09]:
So you’re. We’re driven by this a little bit of just fear. I’ve got to put food on the table and we get up and we go to work and just that motivates us enough to be pretty good.

Krista Dibias [00:04:21]:
You know, Clark always says, I owe, I owe. So off to work I go.

Wes Moss [00:04:26]:
That’s a better way to say it. I owe, I owe. And off to work I go. And that’s like, that’s America, right? A lot of us are in that camp, but it still means we have to be good at our job. So we still have to go, we have to produce, and we have to make sure that we’re not going to get fired. So we’re every day waking up, we’re going in and we’re doing the best we can to continue on and keep making money. I o. I owe.

Wes Moss [00:04:47]:
So that’s the first group. And I don’t know the exact percentage of that, but let’s call that a third. The next third is the group that. And some of these are maybe shared is just optimism, right? We have this sense of optimism that things are just going to get better. And we’re. If I don’t like my job today, maybe I will in a year because I might change jobs and that I will be able to afford to put my kids through college and I will be able to afford retirement. But it’s going to take work to get there. So again, I got to be good at my job.

Wes Moss [00:05:20]:
I got to get up every day, I’ve got to go produce because I’m optimistic that I can have a better life in the future. And that is just a human motivation that just doesn’t go away. The reason I think that what drives this. These are human behaviors that don’t ever go away. Fear, got to work. I. Optimism gonna work. And then the kind of the, the category that we all wanna fall into that is the kind of the.

Wes Moss [00:05:46]:
The star of the three is maybe the, the final third of folks really have a sense of purpose in what they do. So if you can tie back what you’re doing on a daily basis, you’re getting close to not feeling like you’re working, right? So you’re. And for you, it might be an easy example. Like you’re helping millions of people get through a really scary thing, which is their budget and saving, not getting ripped off. We’re trying to help people with retirement. Like that’s a purpose and that’s something really cool. Imagine if you’re at a call center and you’re dealing with people’s tech problems all day. Like, maybe you could say, well, I’m here every day to help people make sure their Internet is working.

Wes Moss [00:06:27]:
Or I talk to a hundred people a day that are mad at me. And like, that’s hard to feel like this great purpose. Either way, whether we have this fear that drives us, we have this optimism or this purpose, we’re going to work. And we particularly that group that’s optimistic and purposeful, they are doing everything they can, we are doing everything we can to be a little better every day, month, year at our jobs. So that whole fundamental tie that’s like, that’s baked into us to. In our DNA, it’s in our behavior really translates to. Imagine that workforce of 165 million people. And every single person is trying to stay employed and make their jobs a little better.

Wes Moss [00:07:11]:
So you don’t see it every day, but you’ve got multiply that by 160 million times 40 hours a week, times 52 weeks a year, stuff gets done and things get better and we innovate. And this the most, I’d say the 2025 kind of headline news out of technology this year is that we all know artificial intelligence, we know ChatGPT and which is OpenAI and Claude and perplexity and all these things that we’ve been introduced to over the last couple of years. It’s pretty amazing stuff. The promise is that it’s going to make us even more productive, but it costs a lot of money. So supposedly OpenAI spent $60 million making their ChatGPT or their AI model work. And supposedly yet to be fully verified. We don’t know if, if this is fully true, but reportedly another company on the other side of the world did the same thing for 90% less. So they didn’t spend 60 million, they spent 6 million.

Wes Moss [00:08:17]:
Well, ironically, I’m talking about the army of American productivity. This came from a firm in China. But guess what? The next day, every big tech company had a war room to say, okay, wait a minute, maybe we can change this code and maybe we can all do this for 90% less money. So we just ended them. First of all, the reason they were able to do it cheaper is that we did it here first. So the army of American productivity AI started here, proliferated here. It was a massive new innovation that leads to productivity. So put all that together.

Wes Moss [00:08:51]:
Whether we get some competitive forces around the globe, we’re still war rooming the very next day to make our technology, as an example here, cheaper, better, that then powers the economy, powers tech companies, and then every industry. That’s why I love the AI example, because it powers every industry for the better. And the next thing you know, companies do better, earnings go up and your retirement accounts hopefully follow along the way.

Krista Dibias [00:09:18]:
Absolutely. All right, well, we’ll go to some questions now. This one came in from Linda in Indiana.

Wes Moss [00:09:24]:
Linda in Indiana.

Krista Dibias [00:09:26]:
Linda says, I’m 56 years old. I will have a pension and Social Security. My husband will also have a pension and Social Security. He has a 401k with roughly $400,000 in it. And I have a 403B with 170,000 and an additional 170,000 in stocks and bonds with Charles Schwab. I also have an inherited IRA with 52,000 that I’ve been taking RMDs for the last five years. I have five more years before it needs to all be taken out. Now, to the question.

Krista Dibias [00:09:53]:
With taxes being cheaper now than they have been in years, I believe taxes will be going up. Should I take all $52,000 out, pay the taxes, and do a Roth conversion for myself and my husband with what’s left?

Wes Moss [00:10:07]:
The. The short answer here, Lynn, is that is we a Roth ir. Roth conversions can make a lot of sense, and she has a lot of time. That’s a good News. Linda’s only 56. I assume her husband is a similar age. They don’t need to do their own RMDs required minimum distributions until 73. Remember, that number has changed a bunch over the last five years or so.

Wes Moss [00:10:31]:
It was 70 and a half, and it kept going up, and now it’s 73 for RMDs. What’s a little trickier here for Linda is the inherited ira. The rules there, you got to take the. You don’t have to take money out every single year, but by the end of the 10th year for an inherited IRA, the whole thing’s got to be distributed. So she’s about halfway through. She only has about five years. So if you look at this collectively, if I’m doing my math right, she’s got 400 in 401k, another 170 in the 403b, and then called $50,000 in the inherited. So that’s about $630,000 or so.

Wes Moss [00:11:10]:
But she’s got. If you think about her timeline, Krista, Linda’s got about 17 years to spread this whole thing out, but she only has five for the inherited. So if you do the math along the way. But let’s go back to what we want to do in general when we approach a Roth conversion. First of all, this is. It is complicated, and it is very individual because everyone’s taxes are very unique. So you have to go to a CPA and actually do a tax projection for this. So this CPA will help you because.

Krista Dibias [00:11:40]:
You don’t get bumped into the next.

Wes Moss [00:11:42]:
Well, here it’s all about the different. The lock system, if you will. So you got to run these exact numbers with your cpa. Just kind of. I want to make sure she does that. But I think of Roth conversions. Is it the Dutch that have the locks? Mm, it’s the Dutch lock system. They are.

Wes Moss [00:12:00]:
Remember, you fill up. These are boats trying to go different levels of water. So the way they do it is they fill up one big lock, they wait, fills up, then they have to fill up the next lock so the boat can go to the next one. And then the next lock, they finally can get to where they want to go. The water levels are different. That’s kind of how I think about these Roth conversions. What you’re really trying to do here is fill up the next tax bracket without going into the next higher tax bracket. Every time we convert into a Roth, it’s ordinary income and it pushes up our overall AGI adjusted gross income.

Wes Moss [00:12:36]:
So you’ve got to be really careful about that. And if you can, let’s say the. She can convert even though she didn’t want to convert a hundred in any given year, maybe in the next bracket, let’s say she, say she gets the 22 bracket, she. That goes all the way up to a little over 200k for married couple, which would mean she would have about 200k worth of, of conversion she could do to fill up that tax lock until you get to the higher one, which is 24%, and then she’s got another 200,000 before she gets to 35%. So first of all, think of it as utilizing these brackets like the lock system, but not going, being careful to not go to the next higher one. Right. We’ve got the tax brackets where our, let’s call it 10 and call it 22, 24, 35 and utilize that next tax bracket without trying to go into the next one or the next higher one. So in her case, Linda, the good news here, I think is that she’s got a lot of years to do this, which spreads out the conversion, which if you do the math, 600 some thousand dollars over 17 years, it’s like 35 grand a year.

Wes Moss [00:13:48]:
What I think, what I would consider if I were you, Linda, is do the inherited IRA over the next two or three years. She could probably get that done in the next two or three years and then start the Roth conversions and then do them over the Next, call it 12, 13 years. It’s only 35 to call it $50,000 a year. Because your IRA should also be growing while you’re doing this over time. So you’ve got to account for that. So you do 35 to 50,000 over the next several years in conversions. And by the time you get to 73, most if not all her retirement money will end up, could be in a Roth. Then she gets the tax free withdrawals.

Krista Dibias [00:14:27]:
Okay, this came in from Brian in Oregon. Hey, Wes.

Wes Moss [00:14:30]:
Hey.

Krista Dibias [00:14:30]:
He says, hey, Wes. We recently Sold a large position in our brokerage for a home down payment in the next two to three years. It’s approximately $50,000. Do you have any thoughts on where to park this money in the short term? Hoping to get your opinion on SGOV versus hysa.

Wes Moss [00:14:46]:
Sgov, yes.

Krista Dibias [00:14:48]:
High Yield Savings Account I guess versus SPA XX or any other suggestions you may have.

Wes Moss [00:14:53]:
SPXX I wanted is another is a government money market. Okay, first of all the crux of this for Brian is to keep the money safe because you got to use it. You don’t want it at the at risk of markets going up and down. But you, you want to get some interest. So how do you do that? And the answer is conservative safe investments, probably a money market fund. Now when you start looking around for these investments and it’s interesting what he listed here they are, one is just a pure good old fashioned money market mutual fund. That’s a government money market fund. Means it’s almost, it should be in government securities Treasuries for the most part.

Wes Moss [00:15:33]:
The, the other two, one is an ETF that ESCOV is really more like a bond fund. Now it’s mostly it’s treasury bonds. So that’s supposedly the safest thing we can invest in provided the US government doesn’t default, which I don’t think it will anytime soon. But it’s really more of a bond fund. So it moves around in price a little bit. Remember money markets are supposed to. And they’re not guaranteed either. Money market mutual funds are not guaranteed either.

Wes Moss [00:16:00]:
But if you’re in a big government money market fund from a big institution, it’s extraordinarily rare for these things to miss that mark or not perform and do that. But the other two options are more, I would call them, they’re riskier investments because one’s an etf, so it’s more of a bond fund. And then the high yield one that he mentioned is that’s a junk bond fund essentially. Now here’s the way to look at this. Remember the Federal Reserve, they set short term rates and that dictates where treasury rates are. So if the Fed is it, I’m just going to use a round number here. If the Fed’s at 4% and they’re, they’ve been around that level for a while. Anything that’s paying more than about 4% there’s got to be some level of risk.

Wes Moss [00:16:48]:
You got to be longer term bonds. They have to have lower credit quality. So if, if you’re, if we’re in an environment of 4% and you look at an ETF that’s paying 7, that’s not a Treasury, it can’t be a Treasury fund. It’s got to be some sort of junk bond fund, high yield fund. So that’s not a ultra safe option. It’s not that it’s not an option that won’t work or won’t make money, but it’s not, I wouldn’t consider that as a safe money option. What he mentioned around the government bond ETF is short term treasury so that’s technically should be pretty darn safe. It’s not a money market either.

Wes Moss [00:17:26]:
Think of it this way. Keep your safe money safe. If you really want to preserve it, you’re going to have to accept around where current short term rates are. And that’s how I would look at this. You can almost you look at the yield of every product you’re looking at and if it’s way above the Fed funds rate they’re taking on extra risk. And that’s, that would be my advice. That’s what I would be looking at if I were Brian.

Krista Dibias [00:17:50]:
Awesome. Okay, this one came in for you from Andrew in Iowa. I currently have a Roth 401K with one employer, a traditional 401K with another employer and a Roth IRA through a brokerage. By looking at general market growth and looking at my current earnings, I think my wife and I may be fortunate enough to retire as millionaires in the distant future. My question is for retirement accounts or even for short term stock holdings. Are those funds and investments in my name specifically or are they at risk if the brokerage goes under? Is there any sort of government backing similar to FDIC that I should be aware of to protect my hard earned savings for retirement? I can’t imagine spending my whole life working to become wealthy and then losing the majority of my money due to a company failing.

Wes Moss [00:18:35]:
Andrew, that worries me too. I’ve woken up many a day over the last 20 some years and thought that same question. Whoa, whoa, whoa, wait a minute. All this money in a big brokerage company. What happens if something goes wrong? The shorter answer is there’s no perfect. There is no FDIC when it comes to brokerage money. However, and this is probably where I got most educated on this was during the financial crisis 0607 08. We were all very worried that some of the big banks were actually going to go under.

Wes Moss [00:19:08]:
And when I say big bank, most of those big banks also brokerage companies. So you’ve got the banking institution but then they have a brokerage side as well. And some of them did go out of business. And then some of them had to be taken over and rescued or else they would have gone out of business. So it’s a very real worry that has happened. It’ll probably happen again. So wait a minute. Well, that’s scary.

Wes Moss [00:19:31]:
Well, it’s not that scary because brokerage firms, investment companies, do have insurance. It’s called sipic. It’s Security Investment Protection Corp. They all pay in kind of like banks pay in FDIC. They all, they’re members. And that gives us that $250,000 per account protection for FDIV Federal Deposit Insurance Company. Well, the brokerage companies do the same thing with SIPIC, and they’re all paying in. And that gives us $500,000 per named account in insurance.

Wes Moss [00:20:04]:
Now, that insurance, Andrew, is not for your investments. If they lose money. That has nothing to do with the insurance. You’ve got a $500,000 account and it goes to zero because the investments are bad. SIPIC doesn’t care about that. They only care if the brokerage firm fails. Someone new takes over. Just like what happens with banks fail, someone new takes over, usually immediately or over the weekend.

Wes Moss [00:20:30]:
If there’s any money missing from that account because of something nefarious or something happened, that’s what SIPIC covers. That something went wrong with the SIPIC insured bank or the brokerage company. So it’s not going to protect your bad investments, but it will protect if the company fails. The other thing I think is really important to note, and again, I remember studying this for really years to feel confident about this. So no wonder people worry about this. Is that your money at a large brokerage firm, think all the big names. Vanguard, Fidelity, Schwab. The money you have in your account is not their money.

Wes Moss [00:21:10]:
It’s separated. It’s not on their balance sheet. So even if the company operationally does something terribly wrong and it goes out of business, it really shouldn’t mean that anything needs to come out of your investment account. It’s your money. And what SIPIC does, just like FDIC does, in the case of a failure, it comes in. And just make sure those accounts are now custodian by someone new. And it’s hard to find examples where big institutions went south and people’s investment accounts got hit at all. It’s very hard to find examples around that.

Wes Moss [00:21:46]:
So you can feel. I feel very comfortable. Whether you have a million dollars or 20 or 50 or $100 million in these big institutions, it’s not nothing in the world we live in is perfectly guaranteed, but it doesn’t keep me up at night having lots of capital in these big reputable firms. And I would also say if you’ve never heard of a firm or they’re not in the world we live in and it’s not a multi trillion dollar firm, then I’d be nervous about that. But there’s plenty of big solid firms to choose from for sure.

Krista Dibias [00:22:19]:
Well, that makes me feel better. All right, so straight ahead you’re going to tell us how we can protect ourselves from some of these big market swings like the one we saw recently with Deep Seek and the AI sector.

Wes Moss [00:22:29]:
The tech. The Deep Seek tech wreck reminds us of something. If you’ve ever done a Jane Fonda workout or if you remember as a kid Rocky running the steps and if Michael keaton is still Mr. Mom to you, then guess what? It’s officially time to do some retirement planning. It’s Wes Moss. Weren’t those the good old days? Well, with a little bit of retirement planning, there are plenty of good days ahead. Schedule an appointment with our team today@your wealth.com that’s y o u r your wealth.com.

Krista Dibias [00:23:06]:
I’m excited to hear about this. How are we going to protect ourselves from these crazy market because it seems like not even.

Wes Moss [00:23:12]:
I mean did. Is it okay to talk about diversification or is that too elementary?

Krista Dibias [00:23:15]:
No, it’s. I think we are all about simplifying the complicated here.

Wes Moss [00:23:20]:
I will say one of the things that kind of a guiding light when it comes to financial advice that for at least for me I’ve probably learned this from you and Clark is to just try to make things as make them as simple as possible. The world is very complicated investing complicated. But trying to make it simple so people can remember because really the fundamental simple principles that people even if you understand and you implement, you can stray from them. And I think the world we’ve lived in for the last couple of years is a good example of that. And it really comes down to diversification. We all pretty much know that diversification is something that will at least keeps our money in a band with a high level of safety that against single security risk Really I remember when I first learning about investments they would. We would the term is well diversify against single security risk. So when you look at it that way, maybe that’s a good way to think about this.

Wes Moss [00:24:18]:
We all know if we if we have 100% of our money in a stock even though it may do really well it could drop by 50% in there while your half your money’s gone quickly. So we want to avoid that. We know that. But even though we know that, we still hear stories all the time, particularly with intact that so and so worked at this company and they got options in this company and that happened to be the best stock of the last year or two or three years. And that person’s a multimillionaire. So you think, wait a minute, am I diversifying away? I’ve got 500 companies, I never get a home run. So what happens over time? The more stories we hear about big gains from a few companies, it leads investors to stray from diversification and leads them to kind of pile into maybe one or two stocks. The MAG7 got really famous the last couple of years.

Wes Moss [00:25:15]:
MAG7 is the acronym for the multi trillion dollar tech companies that did really, really well over the last couple of years. So more and more money actually has piled into those few names. More and more money has actually gotten invested in ETFs or mutual funds that are really concentrated around those names. So the marketplace call it financial media call it just news in general. It’s always working against us in keeping diversified. So what happened and I know we talked a little bit about what happened with AI this is the big tech story of 2025 is they, they came into a well known sector of technology and they basically raised their hand and said hey, we can do the same thing you’re doing, but we can do it for 90% less. Well wait a minute, what about all that money that was supposed to go towards that sector? Next thing you know, technology Companies are down 20% in a day.

Krista Dibias [00:26:11]:
That was deep seek, right? The Chinese company. Yeah.

Wes Moss [00:26:14]:
And so wait a minute. Well, if there’s not going to, if we, it doesn’t cost as much then these tech companies aren’t going to make as much money. And wham, there was this deep sea tech rack all in a day. You know, you wake up, futures are down 3, 4, 5% for the, for the NASDAQ. And it’s a quick reminder that it’s okay. Let’s say we’re not just in one stock, but we’re really crowded into one sector. Tech as an example, you can see your gains wiped out really quickly. And, and for a lot of investors that creates a, a, a, a cycle where people are selling, then they’re leaving money in cash, then they’re trying to get back into other areas or maybe the same area and then they miss.

Wes Moss [00:26:58]:
And that market timing creates bad returns in itself. So it kind of creates this domino effect of really difficult returns for a lot of people. So the reminder here, and I think I continue to remind myself, is that if you’re wanting to sleep well at night and knowing that you have a portfolio that is not subject to a sector or a particular company, to at least protect against that, we just gotta have multi layers of diversification. So the first step is to diversify away from a single company. So security selection. We can’t have one company. One company shouldn’t be more than 10% of a portfolio. That one I think we all understand.

Wes Moss [00:27:35]:
The second would be sector diversification. And we’ve just again, 2025 has been a good example of that, where one sector got hit really hard in one given day. And this example was tech. Back in the financial crisis. It was housing, it was banks. If you were overloaded in banks, we saw some banks go down 90% in a really short period of time. After years and years of banks being concrete in the sand, just these banks aren’t going anywhere. And then voila, people get over, diversified.

Wes Moss [00:28:08]:
I mean, concentrated, they’re playing great dividends. Next thing you know, they’re down 90% in the course of a couple of months. The next would be size diversification or cap capitalization. When I first started 20, some 25 years ago or so in the business, large cap companies were 10 billion plus. Now that’s more like a small company because the markets have grown so much. So you’ve got these different categorizations over the last. Call it five to 10 years. I think it’s a relatively new category called mega cap.

Wes Moss [00:28:40]:
So mega cap is $250 billion or more. That’s considered mega cap. And no, these are not exact definitions, but these are somewhat agreed upon. $100 billion to $250 billion. That’s large cap. Then the next category below that would be mid cap, then small companies, and then micro caps are $500 million and less. So we want to actually have diversification across sizes of companies as well. Geography, geographical diversification.

Wes Moss [00:29:14]:
I think we get a whole lot of diversification just here in the United States because if you look at the marketplace, 40, 45% of revenue for big American companies is coming from outside of the United States. So I think we get some geographical diversification that way. But I think it’s important to consider international investments. Again, geographical diversification. And then we can even look at strategy diversification, because there are dozens and dozens of different ways we can approach investing. There’s growth investing and there’s value investing. They’re pretty different ways of. A value investor is going to have a very different group of stocks that they want to own versus a growth investor.

Wes Moss [00:29:56]:
But we want to have multi style or strategy diversification as well.

Krista Dibias [00:30:01]:
Can I ask you about the geographical diversification like international stock indexes say?

Wes Moss [00:30:07]:
Yeah.

Krista Dibias [00:30:07]:
Is there. Do you have any idea of what percentage you would recommend or that you do recommend to clients in terms of that versus domestic?

Wes Moss [00:30:15]:
That’s all over the map. I mean if you look at a Vanguard target fund as an example, they have. I don’t know the exact year I’m talking about here, but I’ve seen some of these target funds that have 25% 30% in international and those. You can make a case for that because you can say well I’m going to look at the whole world and if the whole world is. If the US is 60% that means the rest of the world is 40. So I should have 40% international so you can make a case for that. I personally don’t. I don’t have nearly that high of exposure.

Wes Moss [00:30:50]:
I have some exposure to international companies but I have Nowhere near the 30 some percent. Okay. Now this could be different for everyone. It depends on your risk tolerance for sure.

Krista Dibias [00:31:00]:
We’ll go to some questions. This one came in from Josh in North Carolina. I previously reached out to Clark on this topic and he answered my question. But I have a few follow up questions that I think Wes might be perfect for. After verifying it was okay with my city and county, my six year old twins Jacob and Lucas started a produce stand to sell our extra vegetables and it’s been very successful.

Wes Moss [00:31:22]:
By the way, a six year old that’s like a first grader. So they’re setting up, they’re harvesting crops.

Krista Dibias [00:31:28]:
I know they’re out.

Wes Moss [00:31:30]:
They have already have a stand and they’re selling veget. Veget vegetables.

Krista Dibias [00:31:35]:
Young entrepreneurs squash squash for a dollar.

Wes Moss [00:31:38]:
Okay, this is.

Krista Dibias [00:31:39]:
I love it. I would like to help them save and invest this money for their future. Can I set them up with a custodial Roth ira? If they’re eligible for a Roth ira, what documentation is required to prove they earn the money? Are there any potential tax or IRS need to be aware of? Assuming there are no issues, do you have a recommendation of where to open the fund or how to invest it? Spoken like a true Clarky. We were thinking about starting them at Vanguard since my wife and I already have Roth IRAs there and investing their 27 in their 2070 target retirement plan.

Wes Moss [00:32:11]:
2070.

Krista Dibias [00:32:12]:
I would love to get your.

Wes Moss [00:32:14]:
That’s the name of a Space Odyssey movie for.

Krista Dibias [00:32:17]:
For context. They’ve saved $1,000 over the last two years. $500 each. And they have a goal to save 700 in 2025.

Wes Moss [00:32:25]:
That’s awesome. So we got two little entrepreneurs selling vegetables on the. On the road. My. One of my favorite jobs, I worked at a place called Northbrook Orchards and I got to over the. In the fall beyond moving apples around, I think it’s why I became a big Apple fan. So I loved. I love all different.

Wes Moss [00:32:46]:
I love apples, but I got to be in the pumpkin patch and actually weigh the pumpkins and if somebody guessed within a pound, they got a free pumpkin.

Krista Dibias [00:32:54]:
Oh, nice.

Wes Moss [00:32:55]:
That was one of my most memorable jobs. It didn’t last that long. It was only that people don’t buy Halloween pumpkins all year round. But it’s like a two week high demand. So for these two guys, these little guys, the answer is there’s no reason he shouldn’t be able to do that. The short answer is the only requirement to be able to put money into a Roth, even a custodial Roth. If you got to have some earned income, that’s it. So if they’re returns, they make 500 bucks.

Wes Moss [00:33:25]:
Even if they spend the 500, remember it’s about what you earn. So they can put in 500 bucks.

Krista Dibias [00:33:30]:
And they do a tax return. Right. Each child has to have a tax return for that.

Wes Moss [00:33:34]:
I don’t know if the kids. So he asked about proof again. Remember the IRS is not going to say send me a W2 for these two. I think it would be as long as you have a ledger that like you make some recordings. And they brought in $3 from Sally Joe down the road and she bought three. As long as there’s a little bit of record, I think that’s all they would need. Okay, it’ll be a custodial Roth because There’s still no 18 or 21 in some states. And as long as there’s a little bit of record, he doesn’t have to send that into the irs.

Wes Moss [00:34:08]:
But he just had to have proof that they’re making some money and they can do up to seven. Seven grand can issue a custodial Roth. Oh, and don’t. I wouldn’t do a. I’m not a big fan of a target fund for a 6 year old. The year 2070 even. I was looking at some of these super far out target date funds. Even for a six year old.

Wes Moss [00:34:29]:
They have. It’s something like 10% in bonds. I don’t think they need to do that. And when you’re that young, I would just be, I would look broad market stock. Pick a fund or two for the kids. They don’t need a target date.

Krista Dibias [00:34:42]:
You think Vanguard’s a good place for it?

Wes Moss [00:34:45]:
I have no problem with Vanguard whatsoever.

Krista Dibias [00:34:47]:
Okay. This question is from Douglas in Connecticut. On several podcasts I’ve heard a typical fee to manage money is 1% or less. However, I’ve never heard what a typical fee would be for a fee only fiduciary. If I wanted to get investment advice, I was hoping for an hourly rate, not a percentage of my total assets. I’m engaging with several companies and I want to know if their fee only fiduciary cost structure aligns with the norm.

Wes Moss [00:35:15]:
So it sounds like he’s getting some feedback. He’s looking for an hourly fee and he’s getting this asset under management fee. And that’s because. So first of all, there are some people, some advisors in America that are fee only, that are just hourly. And you can go to the Napa or napf, national association of Personal Financial Advisors or the Garrett Planning Network and you can look the, you can look up in your state who charges that way. The reality is it’s a really, it’s, it’s. There’s not that many people that are purely hourly. And even if they’re all, if they are hourly, they typically will say, well, I’m 215 hour, but it’s a minimum of 10 hours, maybe 15 hours.

Wes Moss [00:36:01]:
So they do end up having some sort of block fee because it’s really hard to actually, it’s really difficult to have a sustainable business where it’s just hourly. I help you and you’re gone. I help you and you’re gone. You would need brand new clients every single week for the rest of your life, which is almost impossible for a lot of folks to do. So what I find, and I’ve gone in and looked through Garrett plus Planning Network and looked at all the folks that say their hourly fee. You go to their website, almost all the vast majority of those folks also charge an asset under management fee. So that’s the first thing is that on the marketplace you’re going to find typically both. Again, some people may be purely, purely hourly, but the vast majority of people that do charge hourly also will offer an asset management fee.

Wes Moss [00:36:58]:
The other way I look at it is it’s almost as though you think of hourly for financial planning. So doing a cash flow analysis, doing a Retirement projection. I have this much money today, I’m going to save this much. Here are the variables and what should I have when I’m 60 and how much I want to spend? Is that going to be enough? So that’s a planning and cash flow that I see sometimes as hourly and that can help when it comes to the investment side. Think about in the world we live in to be able to recommend something today. How do I know that that’s a good investment in six months? What if everything changes? What if you change? And really we know you’re going to change. We all have life happens. So it’s a hard model if you want investment help to just say, hey, do this because in a year from now it may not be the right thing anymore.

Wes Moss [00:37:51]:
It may be so. But the bottom line here is if you’re looking for hourly or just a one time project if you will, I like the Garrett website, Garrett Planning Network is that you can just search by how you pay and you can. There is a dropdown. There’s like 20 versions of how people can pay and one of them is hourly project only.

Krista Dibias [00:38:15]:
Okay.

Wes Moss [00:38:16]:
That’s I think maybe what they’re looking for.

Krista Dibias [00:38:19]:
Okay. And this question is from John in Florida. I like your idea of having three years of dry powder in retirement.

Wes Moss [00:38:26]:
Is that my idea or Clark’s idea? You.

Krista Dibias [00:38:28]:
He’s talking to you.

Wes Moss [00:38:29]:
I do have that dry powder principle.

Krista Dibias [00:38:30]:
I love at this point. Since money market funds are paying roughly the same as a diverse bond fund like BND and bonds can go down in value, but cash does not. Is it necessary to have bonds in a retirement portfolio at all? And if so, why?

Wes Moss [00:38:46]:
This is a question about. There’s two quick things. One, dry powder is really helpful because it you think about three years worth of money that’s safe or stable and you when the market, the stock side of the market or your portfolio goes down, you can use the safe stuff. It’s your dry powder to get us through market corrections and a rebound. That’s important. But the assets do have to be stable. Not perfectly stable necessarily. And that’s why I put bonds into that category.

Wes Moss [00:39:14]:
Bonds are not perfectly stable. They can go up and down in price. But really I think the crux of this question is what’s going to do better over time, cash or bonds. And I can totally see, I’ve had the same sentiment in the last couple of years. If rates are at 4 and a half or 5% of the money market and the bonds paying the same, why take any risk in the bond I get that. However, over time, if you go back over the last 40 years, Bonds, the return on a diversified bond index or portfolio, they’ve been better than cash. So today, cash, let’s say in any given day, the cash may be at 4. But what happens if the Fed lowers rates to 3? Your money market will immediately adjust lower to 3.

Wes Moss [00:39:57]:
Your bonds will keep the same coupon until they mature. So there’s typically either similar interest or a little more interest in a bond and you get to keep the interest longer. So this is really an asset allocation question. Well, what’s going to do better over time, my cash or bonds? And if you’re a longer term investor, history has shown us that most, most, most scenarios and time periods we’re looking at bonds over time should give you an overall better rate of return than money just sitting in cash. And that I think is at the crux of this question. Great, Krista, I love having you here. I love these questions. So thank you as always for being in studio.

Wes Moss [00:40:40]:
Send us More questions@yourwealth.com contact. Have a wonderful rest of your day.

Speaker C [00:40:47]:
Hey y’all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast. Ensure it with a friend. If you have any questions you can find us@wesmoss.com that’s W-E-S-M-O-S-S.com youm can also follow us on Instagram and YouTube. You’ll find us under the handle Retire Sooner podcast. And now for our show’s disclosure. This is provided as a resource for informational purposes and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors.

Speaker C [00:41:24]:
The mention of any company is provided to you for informational purposes and as an example only, and is not to be considered investment advice or recommendation or an endorsement of any particular company. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. There is no guarantee offered that investment, return, yield or performance will be achieved. The information provided is strictly an opinion and for informational purposes only, and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing. This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal tax or investment advisor before making any investment, tax, estate or financial planning considerations or decisions.

Speaker C [00:42:09]:
Investment decisions should not be made solely based on information contained herein.