Avoiding Misinformation When Investing Your Hard-Earned Money – A Look Under the Hood

Audio Transcription

Broadcasting from the drivetime show studios in business coaching box that rocks it is tulsa’s number one business coaching cpa and every way he’s a gentleman it’s time to take a look under your financial hood with paulalright, we’ll look under the hood with paul hood, and my name is clay clark on the former ussba entrepreneur of the year good morning to you in today were talking about savings, vehicles actively managed portfolios, and so all I want to get your I want to get your take on this because I think it’s an early morning. A lot of people are just waking up. Maybe they’re just had some bacon and some eggs and they’re going okay, okay, okay, you got me, hear you’re talking about actively managed portfolios mutual funds, so I’m going to start up a reading excerpt from your book. I’ll, look under the hood on page 58, where you write. Tritional stock and bond investments generally fall into two different categories:separately:managed accounts, sma and mutual funds mf to be successful in investing. You generally need three things:diversification time to weather up cindytowns in professional money management. The primary driver for people to determine whether to invest in an sma separately, managed account or a mutual fund is how much investable assets do. They have to be able to have proper diversification generally, unless you have at least 1 million dollars, you can not get a top-shelf money manager to work with you and josh. You have to invest in mutual funds. These separately managed accounts and mutual funds at their stores are actually the same thing and consists of that group of money, managers buying and selling stocks and bonds, a separately managed account a holds. The actual stocks and bonds and mutual fund is a pool of fund a bull fund at the find above the primary issue with mutual funds. Are there expense fees and fun cost the limitations of sector funds in the fact that you share investment with other investors, which, more times than not make a rational investment decisions that havenegative effect on you? Okay, so mutual funds versus versus versus separately managed accounts break it down for us. What’s the pros and cons?

What should we be doing if rob still listening, I guess we’ll start with who should be investing in mutual funds or separately managed accounts? I, think everybody should be investing the weather to supplement his account or mutual fund depends on your personality pencil. How much money you have depends on your age, but the business coaching reality is. Is the challenge is imagine this plate, so it hears the best way. I used to an allergy, to explain it say we’re going on a trip from here to california and a separately managed account is like you have a white versus mutual funds like you’re on a bus, so you have a professional driver, they mapped out the trip you just going to sit back and they’re going to drive. The problem is:there’s 50 other people on that bus, and so you may go if you’re going to california there may be people going to oregon, they may be goingyou, know nevada. You say people on the bus. Yes, you and other people who are investing in the fun exactly so. The fund managers having to saw having to please multiple in thousands of people, and so they all have their objectives, and, and so this the bus driver has to please everybody. If you will and so you’re going to get there, you have a professional driver. Just may take you longer. You have somebody make it sick and it messes up the trip for a. But it it’s just a slower pace, but that’s a whole lot better than just going out and in trying to buy individual stocks and bonds. You know on information that you don’t have that separately. Managed account in that analogy would be like having a limo driver you’re, the only one in the car that the only one you have to have to please. So when you have a separate account, it’s only the managers only investing your money for you, I have to say this. I have never met somebody I I’ve. Yet to do it. I’ve never met a person of a friend of mine that I’m close to who has done ever really done a good jobdone well by buying individual stocks.

Never because they don’t know what to do and tim ferriss who has a podcast called the 4-hour workweek are the tim ferriss show I wanted things that he did, which is hilarious? Is he decided to invest proportionately dollar-for-dollar into the same stocks it mike, maples jr invested in and mike maples is a genius of investing, so he was like okay. So how much money did you put into this? One he’s the mike maples I’m, just making up a number, but he says a hundred thousand goes:okay, cool I’ll put a thousand next one. How much do you put in this when he says 300,000 cool I’ll put in 3010 paris made a massive amount of money as a result of just copying exactly what mike maples jr does because mike mabel junior studies, the stocks and I win what ones to buy and I think a mutual fund is probably the safe bet for what the majority of your clients or am iyou’re exactly right, the only chance you have now. We don’t. You know where registered investment advisors, and we really don’t use your traditional retail mutual funds. We use kind of a hybrid, the group that the does is institutional money manager, but they don’t do sector define. So we you know weekend. We can get that’s a long discussion, but if anybody wants to, you know get into that, there’s there’s something in the middle of that kind of takes the best of both worlds, but yeah play. What you were saying is people that try to take take make their investment decision really are making investments.

Is it based on fear or greed, because they’re not doing the research, it’s usually like they had a hard job shop. They been at work all day. They heard on the radio the news somewhere that uber’s taken off oh man over there, like going back when I was going to say that right now was it gone down to the bottom? It’s okay, but I’m saying  the office i. Don’t ever watch the business coaching news or whatever it was there, not a buzz in the office about bitcoin for about 3 weeks there it sits back down, but it’s still $9,000 yeah. It said it was up to 20,000 so yeah. You know I do like to put a lot of time into it. Looking at these stocks, on top of your normal job, you like to research, the markets and all that. Well, how much money could you make extra to invest if you did like an income-producing activity instead of spending all your time doing that research, when that’s not your profession, that somebody else do it yeah it really play. If somebody wants to learn how to research companies, they ought to go to my website. Hood cpas. Com sign up for the hour for free and I’ll, give you the warren buffett book and snowball, because that whole book is about his life and his success was evaluating companies. Is this a buy, hold or sell when can I buy? When should I sell it and it was not follow the leader based on fear, greedreally horrible example that is irritating I’m excited about this professional football team right now you have a 18 of a group. There are no I mean I went with the browns last year, cuz i, don’t really have a team I think the team that I would go for the most would be the arizona cardinals, because I used to live there play youth football in bartlesville for the raiders. So my teams, the raiders and the coach, is the coach of the des patriotes, those guys analyzeall the players in the draft to the nth degree. So they get guys who aren’t drafted to the undrafted guys they get guys off of practice squads. They end up getting all these players that no one even knows exist.

They called me last week. They do their research though, and they get all these obscure guys. I think that jerry jones drafts the same way that most people buy stocks in headlines and he’s like you just had a great year. Let’s pick him up there buying high right there at the height that you’re at the peak of the height they they just had a record game. They just set a record. They had a record season. Their value is maxing out right now, exactly where is bill belichick is going I’m looking for investments that I can buy low because you have a salary cap and only have a certain number of dollars, and so you look in the patriots always end up having a bunch of no names that are high value for whatpay. It allows him to win, because every position is a very good value, so to speak, or is it was dallas cowboys have like one or two big hits and the rest of the team is, is semi, dysfunctional, consistently and i? Think if you’re out there trying to be like just going out the headlines and investing in stocks based upon what you heard is doing? Well, you probably invested too late in the wrong thing, you’re, probably playing at the peak every single time you might buy and sell in love. Paul, that’s not really a move! That’s not a move! Now! I can tell you why jerry jones does what he does say. Jerry jones is not as interested in winning games he’s interested in making business coaching money. I do believe that people have to win games or make money I think he wants to make money. He wants people in the seats enjoyed if we argueto just selling tickets. That was it like, as focus I think you would have signed him. 10 people twice I mean he’s like the grandma football didn’t say he was making a lot of good choices when you’re out of out there. We know your team is going to be terrible.

Just sign, tim tebow come on just just put it in there he’s going to score a couple times. The crowds going to erupt you’re going to lose any way to the plant. He’s got to be able to figure out a punch. So that’s what that’s america’s team, america’s team I feel for the cowboys out there. It’s just it. You know how it is every year jerry jones pics from whoever he thinks is going to be the hot commodity at the time. That’s, maybe not an investment strategy know that I still savings vehicle to talk about vehicle number to number 3 is annuities now annuities. Are you wrote your book here on page 60 of a look under the hood annuities simply put our insurance version of other investments fixed annuities? Are alternatives for cds variable annuities? Are alternatives for sms and mms if it would just now tuning in what’s an sms, that’s a separately managed account or mutual fund indexed annuities are hybrid product allowing business coaching investors to share and investment returns. If the market goes up without the downside of traditional stock or bond investment, are you saying we can invest in something or we don’t have to share in the downside, but we can share the upside how’s that possible socialism be real careful because this this product right here is a great product for some people, terrible product for the people, but it’s also the product play you’ve heard them on tv or radio. You know what’s out for the next collapse of the stock market.

Here’s how you can capture the upside in your games and not have the downside and blah blah blah. They make it sound like it’s something mysterious product, but the reality is is insurance company. If you have an insurance product, your insurance, something your life, your car, your house, in investing, you can ensure an income stream. You can insure against loss and we use these products for the right people. A lot because play the downside has a double effect. Does the upside. So if you have a private investment that goes from 1000 to 500, it went down 50%, but for it to come back up from 500 mm got to go up. 100% yeah yeah yeah, so so it is proven a lot of times that a portfolio or an investment that has a 15% upside in a 10% down side will underperform compared to a product that has a 6% up side and a 0% down side. I want to I want to call timeout on behalf time out funds. You’ve talked about annuities I’m, saying to myself:i love, you guys, I love, america i, strongly disagree with your take on the dallas cowboys and all I want to do is I want to just have a job and I just want to know that I’m not going to retire broke. I want to retire with a million bucks. In my account. I have a job i, frankly, don’t give a crap about all the vehicles. I want to know is I’m not going to retire broke. Help me help me automate my savings. What do I need to do? Paul help me i, want to retire. Successful I want to have some money in the bank. I. Don’t want to think about all this i. Just I just tell me what to do the way. It’s real simple. Just like you know, you don’t work on your car, you you take it to a mechanic at somebody.. Com get an hour of my time, I change time and we can evaluate in and we can lay out the plan. Then. All you have to do is is just save, save, save, learn from a mentor and not a mistake when it comes to your investment. Even understanding is you. You would preach this to all the listeners out there that no matter how much money you make you want to automate a set percentage of your income to be safe. You want to save a set percentage and we come back. I want to talk to her about some of the investment vehicles.

You have the real talk more about whole life insurance. We want to talk about what percentage of someone set it at, what percentage of someone’s income should they be setting aside for your savings & n save, a set percentage of their income? What percentage should they set aside just set aside 2% 3% more when we come back and look it up the hood with paul hood and were talking about? How would you can retire rich stay too? Have you ever found yourself running out of money before the end of the month? Are you saving enough for retirement? Are you getting ahead financially tulsa? If you didn’t look on your financial hood, you come to the right place. It’s a look under the hood with tulsa’s, never want cpa and every way country. It’s a great way to start your weekend, baby, it’s a hard part. Are you doing, but I am outstanding clay’s going to be here, and thank you for being here with me. You know, I want to point this out to get honestly think it’s and everything you’re really not outstanding. Are you staying inside the studio? We are outstanding in the woods. The trees and it’ll be an incredible outstanding performance, know about investing in annuities and now we’re talking about investing in whole life insurance, but before we do that, I just I want to make this real for the average person out there to check my permission for you to make this real for the average oklahoman. You want me to make this real i. Give you full permission to give him the real thrill. Okay, this is the deal if you live in oklahoma right now. There are some very, very wealthy people in oklahoma and some people that are really struggling, but according to all the research that I can find the average income in oklahoma right now is 47000 g of the guy working right now and it’s an entry-level job like target to where I started or business coaching taco bueno. We were making $8 an hour. What’s the minimum wage right now is at 7 750, the minimum? That’s that’s what that is, and that’s the average also the guy making millions, but the average person out there. Let’s just say that the average person is making $40,000 that’s unfair, $40,000 a year. I talk to me about what I should be investing in. You weigh if I’m listening to you and I am a plumber and electrician and I miss any profession that I make 40000 year. What should I be investing it? What play what people don’t understand is when you’re in the accumulation phase you’re actually saving that the investment return isn’t that relevant, because if your investments are high yeah, if your investments are low, you’re buying it on sale and the key is consistency and you have to do every month every month, every month, and so what we preach to people is is creating automatic millionaire plan. If you’re a business owner 3% of your gross gross means money comes in, no expenses are paid, 3% get 3% if you’re an employee. That number should be closer to 10 or 12%, because you know you’re you’re gross in your letter about the same thing. But the key is, as you pay yourself first for one case at work or great, because it come out of your paycheck before you get it so that you don’t have the money to run down to starbucks and walmart and kwik trip and everything else.

What should that? What should that money be going into? What should I be investing in with that money? Well, nice depends on your personality, but generally a nice modern portfolio mix with a mutual fund type investment-maybe a little bit of an annuity stuff, sprinkled in there. But the key is, as you don’t want to get tied into sector type funds, if you don’t have to. If you want to have a portfolio manager that can move back and forth if it was small stocks good place to be great they’re there. If they’re, not they can move out, but the key is consistency bye-bye bye-bye every single month, so we’re talking about our next investment vehicle, which is whole life insurance, whole, life policies are permanent life insurance policies that, as long as premiums continue to be paid, the policy will not laps as opposed to term insurance, which is very inexpensive and a majority of time never pays off. Whole life policies generally are not considered good investments, but can offer the dual benefit of death benefit and a potentially tax free retirement. Strangely enough, there are times when a whole life policy on the joint lives joint lives lives. Lives of a married couple will actually outperformed over funding of a 401k on your break it down from your book here, page 61 of look under the hood. I need a translator, help me well, let’s say you have a 401k and and you’re putting the 12% into it in your company’s matching 6. So when you’re putting money into a 401k you’re going to pay taxes on that down the road, and so often times will run now, I’m, not a big insurance guy, but but what I am is I’m, a big guy that looks at different alternatives and how to think outside the box, and there are some special is I know. This is not life insurance. If you’re going to run down to your local retail shop, specially designed life insurance, that’s based on a second-to-die policy that says, instead of putting that amount that that’s sick, that extra 6%, that your company is not matching on and we put it into it-a whole life policy and whole life policy, and these are supposed to design they over fun. And so what happens? If you die prematurely everything your family is taken care of.

If you don’t, then they build up significant cash flow or cash pot so that you can access that money on the back end income tax, free in the form of loan, so because, when you factor in the end income tax, even though you can get a higher rate of return on your 401k, the the it because it’s income tax, free, a lower rate return, actually puts more money in your pocket. I feel like you. It’s a business coach work with a lot of business owners and you are very in tune with the pulse of what the average oklahoma would want to know here and I feel, like you tell me if I’m wrong here, but I feel like the average person out. There just wants to be able to know they’re setting aside enough money for retirement and they are overwhelmed with all the options. That’s what I see a lot. Do. You agree with other chip. I do agree in and if you talk to people you’ll find this out because people, where do you start like it? You know if you’re, not a professional in this, like paul and his crew. Where do you start? You can find blogs all over the internet. You can find articles who’s right who’s wrong. What if I like this is not an area of your life is like your health right. You don’t want to just you know, holistic everything. If you’ve got cancer, you need some treatment right, so you need to actually go to professional, go to hood cps.Com and get a free hour their time. The warren buffett book they’re, giving away snowball is awesome, that’s a huge value, but the real value is an hour of a professionals. Time and you can get those questions answered. They can get you set up on the right path if I schedule a one-on-one consultation with you do i. What is that look like? What does that one-on-one meeting look like with you? If I do the time, I go to hood cps.Com I’m, going there right now in the hood, cps.Com I go to the business coaching website and I request a free copy of warren buffett’s book snowball, I schedule a meeting or do I need to be prepared for, and then what do I actually get as a result of that meeting, when we get asked what should I bring, you know what should I prepare. The reality is, is the most important thing that to me into my staff, is you try to formulate what you want to accomplish? What are you here for what what’s your goals, you’re you’re, the ultimate rain? Just like you know, if you’re going to go to a personal trainer and you walk in and you don’t know, you know you should really know and I want to lose 40 pounds. I want to get in shape, for this I want to do that so and then their job is to help you design the program to get there. That’s why we do for people’s we design a program of financial success to wear, and all you got to do is walk in the door and say this is where I would like to go. Help me get there, but you I won’t leave the meeting feeling overwhelmed with options. I mean you’re going to give me some pacific carriers, the step one here step to write. Yeah, we tell our clients, you don’t have to understand that the all the details, you have to understand why you have something, and so no all we want to do, and we are very, very good at just at putting things in a level 2 where everybody can understand.

Because of that, my client doesn’t understand what they’re investing in with our tax strategy is. What they’re painful strategy is, then we’re not going to do it. You’ve got understand why I like you like, if you’re wrong with your car, you take it to the mechanic same thing. You know if something’s wrong with the electrical work in your house you going to want to call an electrician. You can really hurt yourself play clark i, don’t know why you mention specific things. I would say this job, just a listener’s out there in a whole contact. You use that inside humor chapter here’s the deal I have been asked repeatedly, not everyday by gas repeat. Is it possible? You know for somebody to almost kill themselves as often as you and I think to myself? No, it’s not and I’ll. Tell you how this happens. It just kept. I tried to replace an outfit I got him andrew bloomer, who works office right. He shouted me on for weekend. Okay, I’m, going to walk you through the first weekend, the first weekend, I’m burning some leaves no wind at all of a sudden. It’s like you, just the supernatural, tornadic shore navient and the bleed goes flying in next thing. You know it’s sets like a massively massive pile leaves on fire and I’m like, and we run out. We get this figured out to eat at the fire. So then I’m like okay, okay andrew. This is not normal and it goes but didn’t you last week mow your lawn and set it on fire and I said yes, I had the mower on the lowest setting I borrowed my son’s more, but how hard could it be and I set the lawn on fire, and this is true. I never heard of that happening to anybody else to take literally like I’m business coaching current is just infecting my body I’d like it’s going to like it’s going to blow off my arm and somehow it anyway it’s parking I can see it like arguing so that electrical current in cell anyway, I said, and so anyway we called electrician. He comes by and you can see the electrical. It’s like a route to get rubber gloves on and stuff. That is crazy. So then andrew goes me to steve currington’s office and I’m, going to steve’s office and i, see and I like slip, and it’s like on concrete and not and I’m serious, like I’m, so lucky that I didn’t die phone back on and then I compose myself, but it happens again in the car near death experiences every weekend. Just come visit camp clark and chicken thighs to your own investments for your financial future. You want to go to hood cps.Com if you want have a proactive look at your financial future paul somebody listing they’re going. Okay, still me on why I should go to your website that require work time. I, don’t know why why? Why should everybody out there get the warren buffett book and schedule a consultation with you, people that are that are actually serious about being successful. You know if, if you’re, you know, if you’re, if you’re not serious about being successful, don’t go, but if you are then let’s just invest at least that investment I’m willing to invest an hour and then play i, hopefully they’re willing to invest in our and themselves go to hood cps.Com and come see. Me know next week, tulsa, insurance and roth ira is right here under on a look under the hood with paul hood