#29 – 401(k) Investor Profiles, Bias, Rebalancing, The Russell 2000 Index, and a Taco Bell Retirement Community

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Wes is joined today by Jeff Lloyd, Wealth Management Analyst for Capital Investment Advisors, for a special show on the road in Michigan! They discuss reversion to the mean and then cover the four main types of 401(k) investor allocation “profiles.” Wes then examines confirmation and recency bias and how rebalancing might provide a change. Then, they do a deep dive into the Russell 2000 Index, exploring companies and comparing market caps to those on the S&P 500. Finally, they pull back the curtain on a brand new Taco Bell retirement community opening in San Diego, CA.

Read The Full Transcript From This Episode

(click ‘Details’ below to expand and read the full interview)

Wes Moss [00:00:01]:
The Q ratio, average convergence, divergence basis points and b’s. Financial shows love to sound smart, but on money matters we want to make you smart. That’s why the goal is to keep you informed and empowered. Our focus providing clear, actionable information without the financial jargon to help 1 million families retire sooner and happier. Based on the long running WSB radio show, this money Matters podcast is tailor made for both modern retirees and those still in the planning stages. Join us in this exciting new chapter and let’s journey toward a financially secure and joyful retirement together. Good morning and welcome to Money Matters. On today’s show, recency, rebalancing and reversion to the meat.

Wes Moss [00:00:56]:
Where are we? Coming to you from northern Michigan, your host, Wes Moss here every Sunday morning along with Jeff Lloyd, who has made the trip from Behem to Detroit to northern Michigan. Welcome.

Jeff Lloyd [00:01:12]:
It is good to be here on a special money matters in Michigan, and I am glad to be a part of the first road trip for money matters.

Wes Moss [00:01:22]:
I’ve done a couple of these from Michigan over the years, but never with somebody like never with a co host like Jeff Lloyd. So this is like, this is a money matters first and this is exciting. I can’t believe they made the trip. Thank you.

Jeff Lloyd [00:01:35]:
It is also my first time.

Wes Moss [00:01:36]:
How was it, by the way?

Jeff Lloyd [00:01:37]:
It was a great trip. It’s actually my first time in Michigan.

Wes Moss [00:01:40]:
Never said I’ve never been here before.

Jeff Lloyd [00:01:42]:
I’ve never flown through Detroit or never been in that airport. But it’s lovely.

Wes Moss [00:01:47]:
It is a really nice airbag. That’s why Delta does so many of their commercials are from that airport. They have that amazing fountain that kind of. Were you there? Yeah. Fountain. It eats itself kind of. It’s kind of amazing. So it doesn’t eat itself.

Wes Moss [00:02:01]:
It just like the water kind of disappears. It’s kind of amazing. So, and again, the weather since you’ve been here, not bad.

Jeff Lloyd [00:02:10]:
Not to brag, but it’s, it’s a mild 70 degrees up here. I quite the difference from the 90 to 95 to 100 degree weather we’ve been experiencing down in the south. It’s a completely different climate up here.

Wes Moss [00:02:25]:
The Michigan governor, I think this week said something about how they’re anticipating more and more people moving up here just because of the summers. Now, I would think as the world gets hotter, or let’s say we’ve had another really hot year, it was hot everywhere. There was the heat dome over Baltimore and Pennsylvania. And the longer you’re in the south, the more you think wouldn’t be kind of nice to be, like, near Canada in the summer because it’s even hot in Michigan. But if you go really north, it does certainly cool off, and that’s why people do it. But people have been doing that for 100 years. I know families up here that are from Kentucky and Texas and Georgia, and they just go north in the summer. So I don’t know if there’s gonna be an influx, but I certainly have.

Wes Moss [00:03:12]:
That’s, that’s why I came up here, for the cool weather and, and the beautiful scenery. And it’s underrated. And there’s 30,000 miles of lake shore, 30,000 miles of lake shore around the Great Lakes, a couple times around the equator. So there’s a lot to like about it.

Jeff Lloyd [00:03:29]:
It’s beautiful. It’s scenic. The drive was a lot greener than I was expecting. I don’t, I don’t actually know what I was expecting, but I, it was just kind of green farmland and pastures everywhere I looked.

Wes Moss [00:03:42]:
Well, we’re excited about. We’re excited to have you up north one. And I would say that turning kind of to the markets in this week, this is one of the most fascinating weeks, really kind of two week periods, but really kind of accelerated this week. One of the most interesting markets I have seen for years. And it reminded me of this week that the market’s most enduring lesson is something that kind of a boring title, but it’s so amazingly true to markets and important, understated. That’s something called reversion of the mean. And over this past week, or really the last couple of weeks now, that’s been happening right before our eyes, the most on point headline I think I saw all week, Jeff Lloyd, was this. This is a CNBC article.

Wes Moss [00:04:28]:
Investors embrace stocks other than tech. And we’re going to come back to that idea about rotation and reversion of the mean. And now I went and I was thinking about this the other day, Jeff, and I wanted, and if you’re listening, as you’re listening here, hopefully driving to do something fun, it’s brunch, maybe it’s golf. But think back as you’re listening here to money matters on a Sunday morning and try to remember how you selected. I know this may not, this is probably second only to the birth of your childhood, but how you picked your 401K funds, not something that people typically remember, but that’s why I’m trying to jog your memory a little bit. Do you remember the first time you ever picked your 401K funds?

Jeff Lloyd [00:05:13]:
It’s not one of those questions. It’s like, I remember exactly, I remember.

Wes Moss [00:05:17]:
When my 445, when I selected my 401 kilochan draft.

Jeff Lloyd [00:05:21]:
Here’s my allocation. I remember exactly where I was. It’s not really one of those moments.

Wes Moss [00:05:25]:
Well, think back, though, and you may have this. I was thinking back about this, and I think of almost a conglomeration, the several times over the years that I either picked my initial amount back when I first started working, then when we moved to another four hundred one k, and then as I go and look at the funds, let’s say on a quarterly basis, I’ll look and see what funds are available, of course. So think back about how you chose that. And there are, I think, a couple of different kinds of investors, and I’ve seen this over 20 plus years. Folks will bring in their four hundred one k and they’ll say, here’s what I have, check it out, see what you think. And here are the way, these are the different kinds of, call it draft picks, choices, investors. And the first one, I would say is the balanced investor. So the balanced investor, looking at the 401K choices, looks for maybe a target date fund or a balanced fund that’s somewhere in that two or three pages worth of all the different options you have, all the different mutual funds and.

Jeff Lloyd [00:06:27]:
Target date fund, that’s like a retirement year that you’re trying to target to retire by. So target date, if you want to retire in ten years, you pick that.

Wes Moss [00:06:39]:
The future date of your retirement.

Jeff Lloyd [00:06:41]:
Exactly, yes, 2035 retirement date or whatever it is.

Wes Moss [00:06:43]:
And those funds are, first there were just balance funds, then there were target date funds. And those target date funds attempted to migrate to be more conservative over time. So if you’re young and your retirement’s 2030 years out, it’s going to be mostly stocks. Typically, if you’re getting within five years of retirement or that date, let’s say you’re retiring in 2030, and here we are in 2024. Your target date fund is likely 40 or 50% in bonds. So it slowly migrates to become more conservative. So that’s the balance investor. They like the idea of a significant percentage in something stable like fixed income or bonds, and they make that choice somewhat based on balance and limiting their overall risk.

Wes Moss [00:07:26]:
So this is an investor that also looks at kind of a long term investment calculator on the 401K website, does some calculations, puts in a desired rate of return or hypothetical rate of return, and then says, okay, here’s what this could be worth if I keep contributing this 401k over the next 20 years or 30 years, and then I can retiree. So they’re, they’re thinking through retirement. And I like that approach. I like that approach. Here’s number two. Here’s investor number two. The investor that believes in just stocks over time. And they, they have a little bit of Rip van Winkle in them.

Wes Moss [00:08:03]:
And we’ve talked about Rip van Winkle here on the show. Goes to sleep, wakes up 20 years later, the world’s okay, even though a lot of bad stuff happened while he was napping. And that investor picks the lowest cost total stock market fund. Maybe it’s just an index. That’s all stocks. And they like that option. They know it’s going to fluctuate a lot. They know that we’re going to experience bear markets that are down 35, 40, 45%.

Wes Moss [00:08:28]:
And they’re okay with that because they know that the really bad years over time, historically, the market has rewarded equity investors over time. So they know they’re going to go through some gut wrenching ness and they’re okay with it. I get that approach, and I, and I mostly like it in some cases. I think it’s a really, really good approach. Here’s number three that I’ve seen. I’ve seen all these examples many, many times. So this is the third one, but we’re gonna get to the fourth one, which is the most common, and I’m not there just yet. So.

Wes Moss [00:08:59]:
Number investor, 401K selection process. Investor number three is the all stable value investor. So they go through the stock funds, they go through the bond funds, they go through the target date funds, and they get to the bottom, usually, it’s usually the last in the selection process. And it says stable value. And it’s essentially, that’s the money market type option. And you look at the returns over time and they’re ultra steady. And you’re not going to see typically, well, you shouldn’t see any negatives. It’s only positives.

Wes Moss [00:09:35]:
It’s. But it might only be 1%, it might be a half a percent in two years ago when money markets paid virtually zero. But over time, there’s been times like right now when money markets are paying close to 5%. The Fed funds target rate is five and a quarter to five and a half. That means ultra short term bonds are right there. So money markets are able to buy those ultra short term, high yielding investments, and they are typically ultra safe. You don’t worry about losing any sort of principle. It never fluctuates.

Wes Moss [00:10:04]:
And they say to themselves, look, it’s it’s so much. It’s so difficult for me to be putting aside $5,000 or $10,000 or $20,000 in any given year. They say, I don’t want to see it go down. I don’t want to lose any of it. So again, I totally get that approach. I’ve seen a lot of people do that. I totally get it. I don’t love it.

Wes Moss [00:10:28]:
It’s not my favorite approach or the reason I love this. It’s hard enough to just purely accumulate and save your way to retirement. Retirement is 20 to 30 years. Hopefully it’s, maybe it’s even more. Maybe it’s 40 years, and it’s hard enough to save enough to fund something that many decades without having some tailwind of growth. And if your 401K choice is only the stable value or the money market, it’s kind of like fighting a fight, which is a hard uphill fight with two hands behind your back.

Jeff Lloyd [00:11:01]:
Well, we’ve heard it before. That’s people’s hard earned money. They worked hard for that. And a lot of people can’t stomach the thought of even seeing that go down in a get on week, month like year. They don’t want to see it go down.

Wes Moss [00:11:16]:
So then there’s, then this is the investors. Investor number four. This is what I’ve seen the most often when it comes to picking 401 ks. It’s the what’s already done well investor. And this is the, perhaps the most common. You scroll through your two or three pages of all the different options. Or you’re going through the website, or maybe it’s a hard copy you were given by HR. Here are your 401K choices.

Wes Moss [00:11:41]:
Put your financial future, take five minutes, choose your funds for your financial future. So it’s one of these ultra important decisions, but it’s usually done in a couple of minutes. And you scroll through all those pages and then there’s this, there’s typically you’ve got, let’s call it the stock section, the bond section, the balance section, and then you’ve got a couple columns. You got a one year, a three year, a five year, and a since inception. And the what is already done? Well, investor, like a normal common sense person would think, scrolls down the list and looks at the one year numbers and maybe the three year, but usually the one of the three. And they zero in on what’s working. Completely common sense. It’s rational human behavior.

Wes Moss [00:12:31]:
So inevitably what happens though? They pick the growth fund. Maybe there’s a sector fund in there and they look at it and they say, well, wait a minute, that crushed it in 2023, it was up 35%. I’m all in. I’m all in on that fund. And they find a few more like that on the list, and they end up with five or six options that have done well already, locked and loaded. And while this approach, again, makes human common sense, it often leads to a ton of disappointment. And that is this concept of reversion to the mean. And the reason I wanted to bring this up today is we’ve been seeing this dramatically, this reversion in the market over the last couple of weeks.

Wes Moss [00:13:20]:
The fascination over the last couple of weeks in this market. I would almost call this the everything else but tech market, at least for the last couple of, you could say the last couple of days, but this has been percolating for the last couple of weeks. One of the headlines I saw this week, CNBC investors embrace stocks other than tech. And it has been kind of the only game in town. Technology has driven, driven, driven. The S and P 500. The biggest companies in the S and P 500 are tech related, and the vast majority of the top. And we know that top ten grouping in the S and P 500 because it moves on a market cap basis.

Wes Moss [00:13:57]:
At the biggest stocks create the biggest amount of movement, and they’re mostly tech. And they take up 35, almost 40% of the entire S and P 500. Even though it’s 500 companies, the ten at the top are so behemoth that they have been driving the bus, driving the bus. And when they’re doing well, the S and P 500 is doing well. When they’re taking a break. And we started to see tech take a break, the question is, well, is the whole market going to fall or what we’ve seen over the last couple of weeks? I call this particular, this last week. You could call it the everything else but tech market. We saw the Russell 2000, which is the small cap index, jump over 10% in a couple of days.

Wes Moss [00:14:38]:
So it’s this rotate in the same day. We saw a lot of technology fall. So it’s not just been one day, it’s been multiple days of that. And we have seen a real rotation. And the reason I wanted to bring up how we pick our 401 ks. How are those two things related? Well, as investors, and I challenge you to think back to the seminal few moments that you’ve spent maybe a total of five minutes, three times, five times over the course of your financial life, because that’s kind of how people do with 401 ks and you’re picking your funds, and it’s very common. And I think it’s just, it’s called a heuristic. It’s one of these investing heuristics, which is a terrible word.

Wes Moss [00:15:18]:
It really is just a shortcut. It’s a mental shortcut. How can I process a whole bunch of information and make an informed decision? And that’s what humans tend to do as investors. And you go down this list, you’re given 40 choices to put your financial retirement future in. You go down the list, column one’s right there. It’s the easiest to see. You say, oh, that one’s up 35%. Let’s pick that.

Wes Moss [00:15:40]:
And this one’s up 27. Let’s pick that. Wait, what’s the sector fund? Up 42. Let’s pick that. And, and we become the what’s already done well investor. And there’s a, that’s fraught with human common sense and a whole lot of problems typically over time. And we’ll get to that. And that goes back to this concept we want to talk about is recency bias, a concept about, were called reversion to the mean.

Wes Moss [00:16:07]:
We’ve been seeing some of that over the past couple of days, couple of weeks. We’ll see if that continues, and then we’ll try to figure out a way to kind of combat that and fight that. We’ve been talking about a little bit about Michigan and a lot about how people pick their 401 ks and what kind of trouble we can run into just by being normal, common sense humans and these, these behavioral, these investing heuristics, really just common sense, mental shortcuts lead us to an area that, where we end up chasing what’s already done well, that’s the most common investor for 401K choices. What’s already, hey, I’m going to pick what’s already done. Well, Jeff Lloyd joins us here in the studio. He is already, I know you tried to sign up for the following, and I just let us know if you, if you got a ticket or not or a pass or, I don’t know, a spot. Taco Bell is opening in a retirement community for folks who are old at heart. They’ve, they’ve come together and they’ve said, this is called the cantinas.

Wes Moss [00:17:14]:
Did you, did you go on that link?

Jeff Lloyd [00:17:15]:
Jeff Lloyd I did go on the link, but when I saw the headline, I thought it was an onion article, and the exact headline was onionated.

Wes Moss [00:17:23]:
For those who don’t know the onion, it’s like, it’s a satire. Yeah. It’s parody news.

Jeff Lloyd [00:17:27]:
But the headline was, Taco Bell is opening an early retirement community for the old at heart. And yes, it’s called the Cantinas, but I clicked on it, and they had announced this, I think, last week and.

Wes Moss [00:17:41]:
Opening August 17 and 18th, so it’s open up next month. All are welcome. You’ve got to be 21 or older, but it’s a retirement community. It doesn’t require the AARP card to get in. I don’t know if this is the dumbest idea I’ve ever heard of or the smart. It may be the most genius move.

Jeff Lloyd [00:18:03]:
I’ve ever heard of, but the memberships, you could get a one day membership or a weekend membership, and they went on sale this past week, and they sold out. They’re sold out. So when I went on the website, maybe one day later, they were already sold out.

Wes Moss [00:18:18]:
There’s a common misconception. The retirement unlocks the life you’ve been waiting for. And while that may be true for some, we don’t think you should have to wait until 55 to live the life you’re craving. Notice they use the word craving because there’s lots of taco Bell food available around the pool. So it’s this, the cantinas. Great name. Early retirement community. It represents a place where all, and I do like this part of this, and we’ve done some podcasts around this, and I love the concept of this intergenerational mixing where old people should be with young people and young people should hang out with 70, 80, 90 year olds.

Wes Moss [00:18:58]:
Because the mix, I think that there’s a lot to that. We can continue to learn from each other, but they want people to be able to live their moss however they want. Well, if you look at live, I guess that’s, I guess Moss is like, more, just live more. Live life to the fullest in the.

Jeff Lloyd [00:19:15]:
Kids come to the Taco Bell retirement community. But if you look on the website and it shows kind of the amenities and things they’re offering, what do you do there?

Wes Moss [00:19:23]:
It’s got a, it looks right up.

Jeff Lloyd [00:19:25]:
The happy retirees alley. You got arts and crafts, you got gaming, you got retiree recreation. That includes, like, pickleball.

Wes Moss [00:19:35]:
Oh, I’m there for the, this says vintage merch. Vintage Taco Bell merch. Like one of the old signs. All right, active living staples. I don’t even know really what that is. And then next level culinary experience.

Jeff Lloyd [00:19:51]:
I think the active living staples, that’s like an exercise class, maybe some active living. Yoga, yoga by the pool, maybe active living staples.

Wes Moss [00:19:59]:
Got it. Okay. Now the other thing about this is that we, I don’t know why we never thought to ask in one of our retiree surveys if they would like to live in a Taco Bell community.

Jeff Lloyd [00:20:12]:
Yeah. We did all this research trying to figure out what makes retirees happy. Why didn’t we say, well, what if there was a Taco Bell retirement community? Would that make you happy?

Wes Moss [00:20:24]:
The other thing that we do know about happy retirees is they are health conscious and they don’t eat, they do not eat fast food. We literally done research around this, even though olive Garden at one point was the number one go to place for the happy retiree. They like a mediterranean diet. They’re healthy, they’re active. They don’t eat fast food because they’re prioritizing health. They like the mediterranean diet. Fish, poultry, vegetables, fruit, whole grains, healthy, healthy fats. I love that term.

Wes Moss [00:20:52]:
And they don’t love processed junk food. But it may be the case that if, even though you have junk food in this place, all the other things outweigh the junk food. Pickleball tournaments. Active.

Jeff Lloyd [00:21:05]:
It’s staples, like you said, liv moss, it seems like a very active retirement community.

Wes Moss [00:21:10]:
Gosh, you’re all in there.

Jeff Lloyd [00:21:11]:
Brought to you by Taco Bell. Now, it’s not Taco Bell’s first kind of crazy idea. About five years ago, they offered, do you remember the Taco Bell Hotel? It was like a Taco Bell themed hotel.

Wes Moss [00:21:24]:
Wow. It’s quite a marketing team. They have any idea, guys, throw it out. How about we do a fast food retirement community? Hmm. I don’t know. I think the guy probably got a promotion.

Jeff Lloyd [00:21:35]:
I think in about a month.

Wes Moss [00:21:36]:
So Mallory, a producer. Mallory, we will be able. Guys, let’s do a Harry Potter, Taylor Swift taco Bell retirement cruise.

Jeff Lloyd [00:21:45]:
I kind of thought Mallory might already have a membership to this. She might be going out there. It’s located right outside San Diego, probably.

Wes Moss [00:21:52]:
What? And therein lies the secret. You know, you can do, you can stick anything in San Diego. And it’s amazing because that is a, that is a wonderful place in the country. It is the perfect weather, not just for a couple of months like Michigan, but all year round. And now it’s expensive. It’s ridiculously expensive, but at least it is kind of the perfect place to be. All right, that’s enough of that. Let’s get back to this everything else market.

Wes Moss [00:22:20]:
Let’s, let’s talk about this, because this is, I would say it’s even more interesting than the market that’s been dominated by the Mag seven. So think about Mag seven. Didn’t come up. It’s only. That’s only a few. That concept is called two years old. It’s when the big seven names that were technology based drove the market higher, and then it became such a narrow market that it seemed like the only thing you could invest in is tech and everything else kind of sat, sat there on the bench. We talked about the ten names that have done well in the S and P 500.

Wes Moss [00:22:48]:
They powered the average for now a couple of years. And the other 490 players on the team of the 500, they’re just sitting on the bench doing nothing right. They’re chewing sunflower seeds that they’re not contributing. And what we’ve seen over the last call it week to two weeks, that has. That tide has turned at least a little bit. And this kind of goes back to this concept. It really is easy for investors to, particularly when these trends go on for a little while, to start to pile into what’s already done well. You can call it dog chasing tail.

Wes Moss [00:23:22]:
You can call it moths to a light. You can call it the hottest dots of the market. And we do that naturally. You’re sitting there, you’re not thinking about the long term history of the market. You’re thinking, wait a minute, that XYZ fund there was up 40%, and it’s in my 401K choices. Well, that seems like a good idea still. So investors will stick money there. That’s what’s already done well.

Wes Moss [00:23:46]:
Investor that seemed phenomenal. Happens beyond just 400k picks. It happens in all sorts of investing, and ultimately, that’s where these investor behavior comes in and these heuristics. I’ve never loved the word heuristics, but it’s essentially this cognitive shortcut or an investing rule of thumb. And our brain engages in these shortcuts to simplify the world. They think about how complex the world is and the decision making that we need to make in any given day, on hundreds or thousands of decisions in any given day. If we didn’t have these shortcuts, simplify complex issues, then we walk around paralyzed. We just kind of stuck.

Wes Moss [00:24:30]:
There’s so many things to think about, so it’s natural that our brain gives us these shortcuts so we can function. But what it leads to when it comes to investing, and I think picking 401K funds is maybe the most fertile ground for this. And what is already done well, investor is the victim of something called recency bias. Recency bias is just the. Again, we go back to Morgan Housel’s book, the Psychology of Money. Nobody’s crazy. Everyone has their own way of thinking around money and investing. And recency bias is just our inclination to overemphasize the recent performance.

Wes Moss [00:25:15]:
And on the surface, it does make some sense, or we emphasize the recent events, something just happened to, and it’s going to continue to happen. We had a pandemic, so are we going to have another pandemic? We have another pandemic, and then we overlook the long term averages or historical trends. What did well last year should just keep doing well next year. It is very natural. It’s a natural bias to assume that that pattern or the recent pattern is just to continue. And humans think, oh, maybe it’ll just happen forever. And that leads people to make these investment decisions based on short term performance rather than long term potential, which is a little more ethereal, a little harder to have the discipline to do. And over time, and this is, I think, where it really gets, where it starts to hurt, folks, is that over time, that one recency bias decision that may not be that bad of a choice can happen over and over and over and over again.

Wes Moss [00:26:13]:
So there’s another recency decision and another one, and another one, and then the whole investing strategy ends up just being. It’s a collection of what used to do well. We’ve got all these things that used to do well, and that will typically lead to a problem, because things that are exceedingly, if we see outsized performance for a year or two, it usually doesn’t last forever. So it’s this recency issue is also the, I would say the cousin of herd behavior, which we all know what that is. Just running whatever, where the herd’s going, I’m joining the herd. And that if the herd gets bigger and bigger and bigger until the stampede becomes a disaster, and it’s then the second cousin to another mental shortcut, which is confirmation bias, where we’re just looking, that’s a tendency for us to interpret things and search for information that confirms what we think. The semiconductors are the new gold, and their prices will skyrocket forever. It’s in every article I can find on the interweb.

Wes Moss [00:27:18]:
So that’s this confirmation and herd behavior that’s just. That’s just tulips of the new currency. And their price will rise forever. And everybody starts buying tulips. The price goes through the roof, and then tulips are worthless. I’m not saying that the sectors that have done well, these behemoth companies that dominate the top of the s and P 500. These are, these are very real companies, very real cash flow, financially healthy. So I’m not saying that this is some sort of tulip situation.

Wes Moss [00:27:48]:
It’s just that there’s only so long markets and investors can shine a light on just a few things without getting what we started to talk about today, some reversion to the mean. And we saw that this week in really in dramatic fashion where the Russell 2000 has been virtually dead most of the year. Wham. Small, small companies, middle sized companies, up 810, 1215 percent in just a couple of days, while what has done well has started to take a real breather. And those two lines are getting closer to each other. So we’re going to get dig into that even deeper here. More money matters straight ahead. Stay tuned.

Wes Moss [00:28:33]:
We keep hearing that inflation is coming down. By the past three years, the common man inflation gauge is still up over 20%. That’s necessities like food, gas, utilities and shelter. How can you possibly keep up? Well, one option is income investing. That’s using a combination of growing stock, dividends, bonds for more cash flow and other areas that can be a hedge against inflation. Look, inflation is tough. Let us help you overcome it. Schedule a time directly with our team@yourwealth.com.

Wes Moss [00:29:00]:
dot that’s your wealth.com dot. So we’ve talked about this concept of how, how folks pick their four hundred one k. One of the big categories is the what is already done well investor category. One of the few elixirs to that is to introduce the concept of rebalancing. And we’re going to talk about that in the 10:00 hour as we round out the 09:00 hour here. I love looking at how inflation has impacted us because it is the fuel of why we invest to begin with and that’s why we spend so much time on inflation. Not that it, well, we face it in our daily spending and we’re faced with it every single time we pay for something. So it’s important in our daily economic lives.

Wes Moss [00:29:45]:
But it’s also the whole reason we’re pushed to some extent to invest, period. If prices didn’t go up and up and up and up and over time, then I think we can get away with saving and not necessarily investing, but because everything gets more expensive. Your savings has to inflate along with inflation as well in order to be able to afford the future and the past four years. And I was just looking at the latest CPI number was the, here we are in mid July but it’s the June number going back four years. So go back to June of 2020, right after Covid had really hit the world to today, inflation is up. Call it about, call it 22%. But some of these other categories, I think, brings to light how difficult inflation has made our lives. And then we’ll look at wages.

Wes Moss [00:30:37]:
And here’s, here’s where this really hurts. Wages over that four year period are only up 17%. So we, we, we, the P, our paychecks in America, on average, have gone up by 17% over the last four years. That sounds pretty good. Well, not so good because food is up 20% to 26%. That’s at home or out eating at restaurants, shelters, up 23%. Used cars, up 31. This is a kicker.

Wes Moss [00:31:04]:
Electricity and gas utilities, both up over 31%. Transportation, up 45%. Actual home prices, this is not shelter, up nearly 55 0%. And then gas in order to power those more expensive used cars, up 90%. All of these areas are essentials of food, transportation, fuel, housing, utilities. So it is a stark reminder to us all that in a lot of ways, the only way we have a chance to be able to pay for the more expensive future is where the assets and our savings to get more expensive and grow over time as well. And that’s a huge part of what drives us to be investors here on money matters. Outpace inflation, protect our purchasing power.

Wes Moss [00:31:53]:
Jeff Lloyd in studio up north, northern Michigan edition here, where we are live from, I don’t know, what do they call the Michigan State? I should know that. Is it the Wolverine State? I know I passed a little town called Wolverine.

Jeff Lloyd [00:32:06]:
I drove past Wolverine Michigan. So, yeah, it’s the Wolverine State.

Wes Moss [00:32:10]:
That’s what we’re going to call it. What’s the state? You can look that up now. You did a little bit of. Well, anyway, good morning. Welcome to money matters. What is the state?

Jeff Lloyd [00:32:21]:
Well, since this is money matters, I did a little research of some businesses and companies that are based out of Michigan before coming up here. You got the usual suspects you got for GMC, right?

Wes Moss [00:32:33]:
Yep.

Jeff Lloyd [00:32:34]:
Other Fortune 500 companies, they’re actually 18 total Fortune 500 companies based out of Michigan. You got Ford, GMC, like I just said, dow, Dow Chemical, Penske Automotive, Whirlpool, Hinsky, Penske Automotive, Whirlpool, Stryker, the medical device company, and then Kellogg’s, the breakfast cereal, like frosted flakes, fruit loops, Rice Krispies, Raisin Bran.

Wes Moss [00:33:03]:
Well, I just call, I think we call it the Wolverine State. We’ve got a lot of wolverines in the family. Yeah. Number one Wolverine state. The mitten state. That’s right. Because it looks geographically a little bit like a mitten state.

Jeff Lloyd [00:33:13]:
It does look like a mitten.

Wes Moss [00:33:14]:
And when you meet another Michiganer, they always put their hand out and they show you where on their hand, the mitten, where they live. Oh, we’re from up here. Oh, I’m from. I’m from up here on the.

Jeff Lloyd [00:33:25]:
What do you call. What do you call the over. What do you call the overhang part of Michigan? It’s not the mitten.

Wes Moss [00:33:31]:
That’s just northern.

Jeff Lloyd [00:33:32]:
That’s just northern.

Wes Moss [00:33:32]:
That’s just northern. The top of the mitten. So where the four fingers extend. To me, yes, I love that there’s all these Fortune 500 companies up here. But just the geography is somewhat mind blowing if you’ve never been here. Everyone thinks of California as the. Is the state of great water and beauty. But Michigan shoreline is, I would consider, a marvel in itself.

Wes Moss [00:33:58]:
29,470 miles of shoreline in the state of Michigan. Now, a lot of that’s just obviously wrapping around, but that’s like driving from New York to Los Angeles ten times. It’s the equivalent to the Michigan’s lakes, the lake shoreline longer than the entire length of the equator, which is about 24,000 miles. So it’s a serious place to be. I think it fits into our outdoor theme that I really believe. There’s been a structural shift ever since COVID and it may only be 1%, it may be 5%. I don’t know. The exact number here is that there’s this.

Wes Moss [00:34:39]:
I think when we have long term trends that get stuck and they kind of stay exactly where they are for years and years and years, when you get some sort of seismic shift in that I think outdoor activity had a little bit of a seismic uptick and has stayed since COVID And it’s more outdoors. If you talk to folks in the golf industry, they’re having their best year ever now. It’s because there was a huge influx during COVID and those people have stuck. Maybe it’s a quarter of the people, maybe it’s a third of the people. But you. You’ve seen a continued uptick. So, again, I think that’s a very real, enduring shift. Oh, and we can work from home.

Wes Moss [00:35:22]:
So we have less time commuting, less time in the car, and less people in the office, because there’s more work from home.

Jeff Lloyd [00:35:29]:
Well, I kind of joked with you on the drive up here. I told you I was the only car on the interstate that wasn’t pulling a boat or pulling an atv or had a truckload full of canoes, kayaks or pulling, pulling a trailer or bikes. People love the outdoors.

Wes Moss [00:35:46]:
My team got this one wrong. And by the way, we’re going to get back to market rotation. This really, the last week or so has been one of the most fascinating markets I’ve seen in a very long time because we’ve seen this great rotation to almost everything. But tech. Tech has fallen and there’s been a huge influx into some of these forgotten areas. Small cap is a great example. We’re going to get to some of those numbers. But because the Olympics is coming up next week, my kids got this wrong.

Wes Moss [00:36:14]:
You did some research around the combined what is Team USA? What will they earn, Team USA Basketball, men’s basketball in their NBA career in a given year? What is the number for that? All my kids got this totally wrong.

Jeff Lloyd [00:36:30]:
The roster next year is going to earn over half a billion dollars. Collectively, the players are going to earn $511 million and contract alone next season.

Wes Moss [00:36:42]:
It’s amazing. Just once, half a billion dollars one season, just payroll for this. What about a dozen guys?

Jeff Lloyd [00:36:47]:
Yeah, you got Steph Curry making about 56 million a year. Durant 51 million. Georgia native Anthony Edwards 42 million. You know, the lowest paid player, Derek White is getting 28.1 million next year.

Wes Moss [00:37:05]:
My kids took Durant and Steph Curry and they multiplied that by, I guess 15 and they were like 700 million. So they were totally wrong. Totally wrong with that. Let’s go back to just this concept and kind of break down what we’ve been seeing in markets because it really is one of the most interesting markets I’ve seen in a very, very long time. We talked earlier in the 09:00 hour around recency bias. Recency bias is the propensity. It’s the mental shortcut to go buy what’s already done well. That’s been really easy to do over the last.

Wes Moss [00:37:39]:
It’s been this bright light that’s pulled, I think, a lot of investors in over the last call it year and a half or so, and it’s made it because technology and the mag seven have done so well. It’s been really easy for investors to kind of pile into that trade, kind of abandoning everything else and not just tech, but even a few names within tech. But there will very likely be a time where other parts of the investing landscape start to percolate and we get a reversion to the meaning, meaning that what hasn’t done well or been forgotten will once again do well. Think again, reversion to the mean is contrary to what we talked about, the 09:00 hour, which is recency bias. And we could be, and we don’t know if this will last or not, but we saw at least some very real signs of that over the past week or so. One of my favorite headlines of the week is that investors are piling into embracing investors are embracing stocks other than tech. Now what do you do to kind of combat this recency bias where you’re adding to what’s done well and adding to what’s done well and getting rid of what has not done well? One way to combat that is just the simple concept of rebalancing, and there’s a lot of different forms of that. But rebalancing involves selling a position of something that’s been outperforming.

Wes Moss [00:39:11]:
So outperforming sector, outperforming asset class, and there’s a lot of different versions of that this and then reinvesting those dollars into something that’s just underperforming or hasn’t done as well to restore, let’s call it your original or more balanced allocation. If, if you had a balance to start with that strategy. And there’s, again, a lot of different forms of this, to some extent forces you to sell high what’s already done well and buy low what hasn’t done well. And that, that helps that. I think that just that the act of understanding this and thinking about this as an investor over time, that is counteracting the very natural human behavior or tendency to chase recent winners. Now, the exact or precise impact of how rebalancing works for any given individual over time, that’s hard to quantify, but I think the real value lies in just that as a discipline. So, hey, I’m going to rebalance. You may want to do this every four times a year.

Wes Moss [00:40:14]:
You may want to do this twice a year. You may want to do this once a year. But just having the concept of rebalancing, I think, in itself can really help long term investors. So you’re adjusting your portfolio to maintain a balance, and that invariably ends up adding the things that haven’t done all that well and shaving from things that have done really well. And that’s the term, that’s the concept. And I think it’s a really important one to remember. And I think it helps combat the 401K investor who’s, who has just picked what’s already done well.

Jeff Lloyd [00:40:49]:
Yeah. So just kind of an example, maybe your original portfolio you were, and these are, this is just hypothetical. I’m just throwing out percentages here. Maybe you were allocated to 20% tech. It had a big run over the last year, 18 months, and now you’re 40%. And now you’re 40%. You need to take a look at that allocation and think, well, is that good for my situation right now? Maybe I need to trim some out of that and into some of the stuff that hadn’t performed as well.

Wes Moss [00:41:24]:
Well, think about this, and I’m glad you brought up tech. The markets we know have been dominated by tech, really, for the last four years. It feels longer than that, but it’s really only been about the last four years. And if you looked, more importantly, the S and P 500. And really, that started during the COVID bottom. So after the markets got crushed, then you saw this really nice run from tech. Even though you had a huge drawback in 2022, it ultimately has powered higher, if you’re looking at the Nasdaq. But I think it’s maybe more constructive to look at the S and P 500, Jeff.

Wes Moss [00:41:58]:
And the S and P 500, equal weight index. There’s a huge difference between the two.

Jeff Lloyd [00:42:05]:
So the equal weight gives every company in the S and P 500 the same percentage. It’s got the same weighting. It’s. It’s not all market. Remember, the S and P 500 is a market cap weighted index, so the bigger companies carry more of the weighting now.

Wes Moss [00:42:23]:
So what’s happened? If you look at those two, one, they’re both the same company, so they’re both the same 500 companies. Both indices, they weight their constituents very differently. So the S and P 500 is, to some extent, always somewhat dominated by the top part of the. Of the index, because it’s the biggest companies carry the biggest weights, market cap weighted. But if you go back to, let’s call it 2007, I went back 17 years. It’s almost like a horse race between these two indexes, meaning that you’ll see a year or two where the S and P 500 is doing better than the equal weight, and then you’ll see the equal weighted version of the S and P 500 do better than the S and P 500, meaning that when that’s happening, you’re getting a broader rally of companies, because there’s. You’ve got many more middle and somewhat smaller companies on a relative basis in the S and P 500, and they’re pulling their weight. And I went back and looked at this 2007 to eight s and P 500 is winning then in twenty eleven S and P equal weighted.

Wes Moss [00:43:30]:
So back on top. Then the S and P 500 catches up. Then in 2012 through 2018, the S and P 500 equal weight has a long winning streak. Then by twenty twenty s and P five hundred catches up. They equal out again in 2022. And then since October of 2022, the S and P 500 again dominated by tech. Large companies has been waiting, waiting until recently. And herein lies this potential rotation we’re starting to see.

Wes Moss [00:43:58]:
We’ll see if it endures or not. But there’s been some real activity around that. For one playing catch up to the other. We’ll, we’ll dive further into that. More money matters straight ahead. Stay tuned. Is the rotation real? We have seen over the last week or so all sorts of other areas that have been left sitting on the bench chewing sunflower seeds, not doing anything, start to rally. The S and P 500 equal weighted index has been playing catch up to its big brother, the S and P 500 that’s been winning for now a couple of years.

Wes Moss [00:44:37]:
We’ve seen a move higher. We’ve seen a move from small companies that have, again, really not done a whole lot until the last week or so rally 1012, 14% in just a couple of days while tech is sold off a little bit. So it’s just an interesting corollary to, and that’s what brought me to talking about rebalancing. And if we’re picking 401K funds that have only done well and we’re getting so one sided or one so ultra focused on tech, that is, yes, done very well, we don’t want to be in a position where that takes a backseat for the next year or two and everything else rallies and we miss out on that as well. And that’s why I want to always be rebalancing to make sure we maintain a balance and we don’t get too lopsided in our investments.

Jeff Lloyd [00:45:24]:
Yeah, it really seems like lately, over the past couple of years, there have been seven to ten names that have completely dominated the financial headlines and the market headlines. But what we’ve been seeing over the last couple of weeks and couple of days is there are 490 other companies in s and P 500 that have some weight. And what we’ve really seen over the last couple of days is maybe a couple of names playing catch up.

Wes Moss [00:45:53]:
Maybe. Is the tide turning? So are there economic reasons we could see smaller and middle sized companies play catch up to the market? Sure, we absolutely could. Or it could just be good old fashioned reversion or regression to the mean. It just could be that prices revert to the mean over time. And this is actually a, this is a combination of quotes by the legendary investor Eugene Famae, who is famous for the principles of the efficient market hypothesis. He’s one of a few prices revert to the mean over time. However, it’s extremely difficult to predict when that reversion will occur. And if we’re attempting to time the market, usually that results in some sort of underperformance that again, kind of goes back to this concept.

Wes Moss [00:46:42]:
At some point, what’s been left behind catches up and what has been way out in front of the race, sprinting, kind of gets tired and falls back into the pack. And that’s this. That’s what could be happening. Now I would say that is this a long term trend or this reversion we’ve seen over the last week or so? Maybe, maybe not. Maybe, maybe this market goes right back to only loving tech. So there are so many billion dollar companies that you probably have never heard of. And the reason I’m bringing this up, and I think it’s an important topic here on money matters, is that we small, we, we small small. We saw small caps play this massive amount of catch up this week in something we have not seen for a very long time.

Wes Moss [00:47:28]:
The Russell 2000 is an index of about 2000 companies, not exactly 2000. And it has been negative most of the year. It’s just gone nowhere. S and P five hundred’s gone up a whole bunch. And this entire, just think about this, a few companies powering the S and P 500. It’s had a really good year this year, yet 2000 other publicly traded companies just totally ignored and negative on the year, literally until call it a week or so ago, that all of a sudden we see the sentiment of the market. And look, this has been a, there’s so many variables getting thrown into this market. We’ve got inflation, the unemployment rate that we’re watching, the Federal Reserve, an election we had, and there was an attempted assassination.

Wes Moss [00:48:18]:
And it’s again a commentary that’s terrible to see any sort of violence, any sort of political violence. So I know that the tension in America is high. So there’s just a lot being thrown at sentiment. There’s a lot being thrown at this market. There’s so many cross currents and turbulence that maybe some of this is shaking up markets. But here we’ve gone year to date with the Russell 2000 essentially negative or flat, all of a sudden a couple of days up almost 12%. That is a dramatic market move.

Wes Moss [00:48:54]:
While at the same time some of the biggest winners of the year so far have gone in the other direction so that you’ve got this massive gap only a week or two ago. That gap is getting closed between the forgotten companies and the most popular companies there’s, and we don’t know if this is just the beginning of a trend and it’s going to sustain and this rotational continue or may just be a head fake. We don’t, we don’t know. But with that, I wanted to kind of do a little bit of a deep dive and see what’s in the Russell 2000. What are the companies that are in this index of? Again, I look at this as these are, as I’m going, as I’m researching, I didn’t look at all 2000 companies, but many of them. And there are so many multibillion dollar companies that most people have never heard of and maybe partially. Jeff Floyd, it’s because billion isn’t a lot anymore and we have trillion dollar companies now and a trillion is 1000 billions. So maybe people don’t care anymore.

Wes Moss [00:49:55]:
But this is a huge part of the marketplace and I think it’s just worth at least peering into opening up the hood on the Russell 2000. What the heck is in here? Well, I don’t know if you knew some of these. You knew what, one or two of these?

Jeff Lloyd [00:50:07]:
I knew a couple, but it was based off their proximity to Atlanta, which was.

Wes Moss [00:50:12]:
Well, let’s start with that. Which one was this?

Jeff Lloyd [00:50:13]:
It was chart industries.

Wes Moss [00:50:15]:
Chart. By the way, I love the names of many of these Russell 2000 companies. They’re very industrial. They’re very just kind of old America. They’ve been around. They are multi billion and they didn’t have a marketing team come up with the name of this company, chart industries.

Jeff Lloyd [00:50:33]:
And they are based in ball ground, Georgia.

Wes Moss [00:50:36]:
So we’re going to go through a bunch of these names, but we’re not recommending these. We’re not saying buy or sell any of these companies. I do think they’re just really nice representations of the Russell 3000 or the Russell 2000. Now, while Jeff Lloyd gives us the average market cap of an S and P 500 company, I’m going to start with the average market cap of a Russell 2000 company. If you looked at the whole list, kind of the top of the list, the biggest of the group are just shy of 10 billion. And then if you go all the way down the list to number, call it 1900 or so or lower, you’re going to get into some companies that are in the 200 million range. So not even close to a billion there was one I found that was only worth $50 million in market cap million in an index in a world where billion is now very easy to do or very, very common. So that in contrast to the average company in the S and P 500.

Jeff Lloyd [00:51:34]:
Jeff Lloyd, which is about $92 billion, you take the total market cap of the S and P 500, about $46 trillion. Divided by 500 companies, you get about $92 billion.

Wes Moss [00:51:49]:
So that’s in perspective. The S and P 500 is. The average company is close to $100 billion. It just. It’s hard to fathom something that large versus companies in the two to $3 billion space. That’s what we’re looking at with the Russell 2000 small cap. That’s what really came alive to some extent this week. Of course, the S and P 500 is dominated just by the top ten or almost all trillion dollar companies.

Wes Moss [00:52:18]:
Not all of them, but let’s call it seven of the ten, which are meta is about 1.2 trillion. Apple is one point, or 3.5 trillion, approximately trillion, which is a thousand billions. A thousand billion. So let’s take a look at these billion dollar companies. Just billions that you’ve probably never heard of.

Jeff Lloyd [00:52:40]:
It’s funny, I know you said a trillion is 1000 billion, but you’re just talking about companies in that Russell 2000 index that are kind of in that billion to 3 billion. If they’re a billion dollars, like these are, these mega cap names are a thousand plus of those companies, just to put. Just to give some perspective to that.

Wes Moss [00:53:02]:
So think of this. Here’s the top 25. And again, this is also. So the Russell 2000 is also market cap weighted. Here’s some of the top 25. Fabrinet. Have you ever heard of a company called Fabrinet?

Jeff Lloyd [00:53:13]:
I haven’t.

Wes Moss [00:53:14]:
It’s a $9 billion company. How about UFP Industries? What do they do?

Jeff Lloyd [00:53:22]:
I’m not sure.

Wes Moss [00:53:23]:
They do lumber for manufactured housing. Seven $8 billion company. Commercial metals company.

Jeff Lloyd [00:53:30]:
They’re in the metal business.

Wes Moss [00:53:32]:
They do know that they are in the metal business. These are names that you would hear. The 1920s champion X. Now, I thought champion Xdem would have been maybe the apparel line. Champion apparel? Not at all. This is a chemical company that you probably never heard of. Halos. I don’t even know how to pronounce this.

Wes Moss [00:53:53]:
Halozyme. Hello. Zyme therapeutics. They’re. They’re biotech company, about 7 billion. Toronto or Torino? Realty corp. $6 billion REIT, your favorite from ball. Ground chart industries.

Wes Moss [00:54:05]:
$7 billion. What do they do? Oh, you knew this cause you’re.

Jeff Lloyd [00:54:08]:
It’s. It’s a industrial. It’s an industrial company. You’re right.

Wes Moss [00:54:12]:
Well, they do cry, don’t they? Make cryogenic storage for liquid and liquefied natural gas.

Jeff Lloyd [00:54:17]:
That sounds right.

Wes Moss [00:54:19]:
Yeah. And that. I think you know them because you were you.

Jeff Lloyd [00:54:21]:
I was at the energy business, through the energy business.

Wes Moss [00:54:24]:
This one I think most people do know because if you’ve been in a mall lately, Abercrombie and Fitch, $8 billion company. So that’s just out of the top 25. Those are some of the very biggest names in the Russell 2000. Then I went to number 1000. Just halfway through the list we got, again almost 2000 companies, as you would expect. Halfway through the list I found a company called Ethan Allen Interiors. Yeah.

Jeff Lloyd [00:54:50]:
Furniture company. I do know them.

Wes Moss [00:54:52]:
You do know them. They’re 750 million. So again, not even a billion dollar company. I love this one. Ivanhoe Electric Inc. They’re a $1.3 billion company that does mining for metal, that’s used in electrification. So very specific. Kineska Pharmaceuticals international building in half.

Wes Moss [00:55:14]:
Pro assurance. So it’s about a $600 million property casualty insurance company. Vimeo. I only knew Vimeo because after lacrosse tournaments and some of these I don’t go to. There is a dad that films and has this automated videography that’s kind of up on a big tripod and I watched that via Vimeo. They’re a $600 million company. So I’ve seen that video platform. And then number.

Wes Moss [00:55:44]:
Then I went. Then I went to the end of the list. I found number 1900 out of the Russell 2000. FTC solar get never heard of them. They are a 550 $50 million company. So these are, these are companies that most people have never heard of. The few brand names in there, but it’s just an incredible market of multi billion dollar companies. Takes a long time to become a billion dollar company, yet it’s been ignored for really for quite a while.

Wes Moss [00:56:19]:
That has started to perk up. We’ll see if that trend lasts. Yeah.

Jeff Lloyd [00:56:22]:
And the companies that you just mentioned, remember, it’s not a buy or sell, but that’s across a diverse set of companies across multiple sectors.

Wes Moss [00:56:31]:
And we’re always careful about that here on money matters, particularly with individual stocks. Well, really, any investments we talk about here on the show, we’re very careful to make sure our audience knows that just because we’re talking about them, they’re not a buy or sell recommendation. We’re using these as educational pieces of the equation so that we can learn about markets, the other reason that we have to be really careful about that is that everyone listening, we all have our own financial blueprint, our own DNA, our own fingerprint. So everyone’s different. So what might be okay for someone in one phase of their life may be completely wrong or the wrong investment for someone else. And that’s why we do that here. I know sometimes people say, well, why can’t you just talk about the stocks you like or ETF’s you like? It’s really because when we’re talking to a broader audience, there is no one size fits all. And that’s just kind of an explanation around that.

Wes Moss [00:57:25]:
Mallory is shaking your head and giving me a thumbs up for that. She always reminds us that you can’t just talk about individual companies without saying we’re not recommending them in any way. What I do think is very helpful for investors is the bigger, broader concept. The overarching theme of today, which is human investor behavior, tends to lean towards something called recency bias, which is the cousin of herd behavior, where everybody runs into one area because it’s already done well. We find that with how people choose their 401K options, it’s natural. It happens. The one way we can combat that over time is have the discipline, the discipline to understand rebalancing. Whether it’s rebalancing from stocks to bonds or one sector to another sector, it’s a helpful concept to help us not get overly weighted and overly dependent on one individual area.

Wes Moss [00:58:23]:
I think that which is at the heart of diversification is just something that I want to continue to remind investors about because I think it’s powerful. Jeff Lloyd, thank you for being here in studio making the trip. Welcome.

Jeff Lloyd [00:58:38]:
Thanks for having me. Special Sunday, money matters, Michigan. Really enjoyed it this Sunday morning and.

Wes Moss [00:58:44]:
I wanted to kind of wrap up to our core theme today really has been about reversion of the mean. We’ve seen some of that happen in the market in a pretty dramatic fashion the past week or so. And I thought it was a good time to bring up reversion of the mean recency bias, which is how normal humans very often think, hey, that did well, let’s buy that. And then rebalancing, which is the answer, perhaps, or the antidote to getting too overly concentrated or invested it in one particular area. We’ve seen the, we spent some time talking about Russell 2000 companies. The Russell 2000 is a large index of 2000, quote, small cap companies small if you count two to $3 billion small. Some of them are 10 billion, some of them are a little under a billion. That’s still massive.

Wes Moss [00:59:31]:
Those are still huge companies, but they, they are nowhere close to the average s and p 500 company. That is over $90 billion. So that is for some context. We know that over time with a diversified portfolio, we don’t want to just have a few names or maybe even one index. It helps, I think, over time, to have some diversification between small and large companies. So, so that is the concept that I think is an important takeaway. I don’t know if the tide has turned. It certainly has over this past week or so.

Wes Moss [01:00:06]:
But is this a trend and we’re going to see this for the next six months or the next year or two, or is it just a blip on the screen? Time will tell. Of course. Jeff would.

Jeff Lloyd [01:00:15]:
Yeah. And I also think it’s just a healthy process that’s taken, taking place in the market right now. And you can tie that back to what you talked about, rebalancing. That’s a healthy step to take in getting to your long term goals and objectives.

Wes Moss [01:00:32]:
Healthy discipline.

Jeff Lloyd [01:00:33]:
Healthy discipline. If something has run over the last couple of years, it may be time to kind of revisit what that allocation looks like in your portfolio and revisit some other parts of the market.

Wes Moss [01:00:44]:
And the other reason I wanted to bring this up is that just in talking to families that I work with over this past week or so, the conversation is, hey, if we do sell something, where does it go? And my answer now for a while has been, well, there’s a lot of overlooked areas in the market. That’s why I love the headline from this week from CNBC that said investors are embracing investments other than tech. I think that’s healthy to see the market, to see middle sized and smaller companies like we’ve seen recently them start to participate and do well. That’s a broadening of the market. And that’s, I think, a lot healthier market than just a handful of names carrying the day. Speaking of, we’re going to wrap for the day. Thank you so much for tuning into our Michigan edition of money matters here on a Sunday morning. You can find me, you can find Jeff Lloyd.

Wes Moss [01:01:39]:
It’s easy to do so@yourwealth.com. that’s y o u rwealth.com. have a wonderful rest of your Sunday.

Mallory Boggs [01:01:53]:
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. 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.

Mallory Boggs [01:02:41]:
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