Ep 186: The BRIC and You - More Knowledge, More Wealth

  📍 Good day. This is Gabriel Shane, certified financial planner and your host of More. More wealth here on every weekend, talking about all important topics of personal finance. My goal is to give you the knowledge you need to increase your wealth Now to the listener, you can always reach out to myself or any one of my colleagues here at Falcon Wealth Planning.

Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the bird, or visit our website@falconwealthplanning.com. That's Falcon WP dot. For sure. Now I'm the President of Faculty Wealth Planning. We are fee only non-commissioned true fiduciary folks. We're an independent registered investment advisory firm.

Folks, we work with anybody that needs financial help and we deal with everything that involves a dollar sign. Folks give us a call. We're offering one to two meetings, one to two hour hours of our time, folks, at no cost. We are offering a free assessment to help relate this show to your specific situation, and we go over everything that involves a dollar sign.

Folks, that's where you are today, how retirement looks like. Talk about tax investment, estate planning, insurance, folks, you name. Anything that involves a dollar sign, we would love to help. And we have all offices all over and we help people nationwide. Give us a call. Our phone number is (855) 963-2526.

That's 8 5 5 96. Falcon like the word bird, and we can help put a personal assessment for you. To answer the questions that you have keeping you up at night. Folks, there is a lot to talk about today. So now they're labeling, labeling it the brick. Let me go over the brick here. I just took some notes here, which is Brazil, Russia, India, and China.

And we talked about this a few episodes ago, how they dodge in the dollar. They're saying we're gonna do our exchanges, our petrol items in their. Foreign currency. Now, before everybody starts freaking out, and I talked about last week could be a good time to analyze, to see if you should be having inve, uh, having international into the por your investment portfolio.

So this may make sense. This could be your four , your ira, your brokerage count, folks, you name it. This is an important time to just see and reassess what you're currently doing because here's the thing, things are evolving. They're changing. That's not anything new to us. We're fully aware of that. And so this is the time you have to understand where we are and where we're headed.

Because when you look at multiple academic reports, where the US is currently 50 50 of world money, uh, back in the seventies we were two thirds of the world money. We were more so we reduced by a substantial amount. Now when you look at what it's expected to be by 2050, we're looking to be about one six.

Of the world's money, about 18%. So this is substantial cause the world is catching up. Now, is this just the natural attrition of that? We don't know, but let me highlight a few things. I've done additional research since the information came out from the episode two weeks ago now, first and foremost, okay, the US dollar still dominates the Foreign exchange reserve.

Okay. More than 60% of global reserves are currently held in the US dollar. Now Euro is number two, but 60%. Of world reserves. That's an important number. Why? Cuz it's still the most stable currency. Why? Because it has the most stable government. Now don't calm down before you go crazy on me for saying this has nothing to do with Biden or Trump or anything is by the simple fact, even if you wanna say America's corrupt, well guess what?

We're just the least corrupt out of everybody else that's out there. So pick your poison, right? So, uh, important to highlight that. Okay? So, Countries trust America for that reason. Let's continue. Global trade is still conducted mostly in US dollars. Now, the Fed estimates the past 20 years from 1999 to 2019 that 96% of trades in North America were, were accounted for.

Well, now it's about 74% of trades of APAC and 79% of trades for the rest of the. So, uh, global oil trading, which accounts for 6%, is largely still traded in US dollars, even despite the whole Brazil, Russia, India, and China. What am I saying here? They represent a small portion of global petroleum. Still one of the major users is Europe.

And you have to understand they're still trading in dollars because it's still the most secure. And this oil, this petrol dollar represented 6%, yet again, just 6% of overall trade, which yet again, majority is still in US dollars. So it went from 96% is still about 74%. Okay? Conducted in US dollars. And Apex is 79%.

So what's the point of all of this? Okay, well, the dollar's international role, whether for trade, investment, use of global reserves remains quite strong folks, and there is nothing to rival it in the near future. I mean, you gotta understand what options are there. The rui, the RU pool yen, I mean, it's. You have to understand that still America's dollar is still the strongest and most stable and the most secure.

By the way, folks, if you're just joining us, you're listening to Gabriel Shaheen, certified financial Planner and your host of More Knowledge, more Wealth here and every weekend talking about all important talks of personal finance. And today we're just talking about the brick, Brazil, Russia, India, and China, and discussing kind of with their pack together along with other countries as.

I know France made some comments. I know Japan's now using Russian oil and we get that, and this is a normal cyclical nature of just being strong in power and now falling off a little bit. At the end of the day, you need these cycles when everything is great, people think they can do it on their own until it's not great.

I talked about how America was essentially the escrow company of the world when they come to the petrol dollar of oil exchanges. So my point. Is, what does this mean from an impact for you? I think the simple commentary is you have to start, especially knowing that international grows at a faster pace than us.

You have to note that it is vital to have some exposure in your portfolio. All I'm saying is just be diversified. Hey, you might have the best horse in the race. Okay, well that horse, something may happen to. And so it's important to abandon all the horses of the race. Yeah, the payouts aren't as high cuz it's risky to be in, just invested in one horse or one stock or one asset class, but you spread the risk out that way.

All your eggs, as you know, are not in. Your basket in one basket, right? You have 12 eggs in 12 baskets, essentially. So this is there. There should be no different, and people are doing that with their cash. They, some people have money in multiple places. Why would you treat anything different with what we're discussing today in your investments, in your future?

You want to remain to be globally diversified, and this is important through international markets, whether it's emerging. Or developed country, you wanna make sure you have that large, medium, small caps growth and value tilts as well. You wanna make sure you have profitability measures. There are important attributes and factors to take in that significantly outperform the markets where sometimes a third of the whole index is underperforming and underperforming from a fact that it's market cap weighted, which means it's just measured by the largest.

That's what you owe more in. There is no other factor outside of you're just owning the largest. So it's important to have a professional help and opinion of what you're invested in. Vanguard is a fantastic fund company. We love them. We use 'em for our clients. With that being said, when you start going into small caps and international and so on, there is no intelligence behind it.

It's just market cap weighted is, that's what's best. No, there are other indices still with the same exposure that outperforms significantly. Why? Cuz brain and sophistication are put into it, not just the waiting of how big the company is, which means you're riding the wave. Even if they've declared bankruptcy, even if they lost a big contract, whatever the case is, and the changes they only make are one to two times a year.

Why? Because it's called a reconstitution, and oh, by the way, they sell low. When that happens. What do you wanna do? Sell low or buy low. I see this all far too often, folks. This is why it's important to talk to a professional that can truly customize your situation into a plan that works for you Folks, give us a call.

We would love to help. We have offices all over. We help Nationwide and our headquarters here in Southern California. We would love to help folks. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the Bird, or visit our website@falconwealthplanning.com. That's falcon wp.com for short. We can help answer these questions for you and give you one to two hours, one to two meetings of our time folks at.

Cost. We would love to help. Now we are gonna talk more about what's going on in the world and in the markets and what you should be doing with interest rates, with energy, so on and so forth. Cuz I know a lot of people have been making changes of what happened in 2020, and some people are still down in their portfolios.

Most people that were invested in tech. So we're gonna talk more about these, but we're gonna take a quick break after a few.

📍 Welcome back folks. This is Gabriel Shane, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Now, our goal is to go over all important topics and today I was talking about the petro dollar and how that could affect your portfolio, especially if you don't have a lot of.

Okay, so what does all this mean to you? Well, you have to adjust your portfolios. You can't just continue doing the status quo. People who did that from 2000 to 2009 didn't do anything. They lost 10% in their portfolio. If they're just investing in the SMB 500, you stretch out over 20 years, you've underperformed the 10% annualized return that the SB 500 has done.

So you have to be smart about this. In addition to that, what did you do during Covid? A lot of people bought tech companies, which was logical to do cause we needed technology so we weren't strapped in our home. But then they wrote that all the way down in 2022 when tech was down 40%. So are you just buying and holding?

That doesn't make as much sense anymore. You have to take advantage of the ups and downs on the market. You can't time the market. All I'm telling you to do is develop a plan to stay. I'll give you an example of discipline. During covid, the energy, the barrel per uh, cost per barrel dropped to under $30, under $20, around $10 a barrel.

Okay. Now, nobody knew when the bottom was in our firm, it was when it was roughly 20 to 30 uh, dollars a barrel. We decided to have a specific allocation towards energy, and here's why. Historically, energy had roughly a seven to 9% exposure in the s and p 500 into the markets. Now, what we did, because when that drop happened of oil with having Chevron, Exxon, a lot of these companies that produces them, it dropped to less than a two and a half percent.

So we manually added a 3% exposure into the portfolio. Well, today it's a 5% exposure, roughly into the s and p 500 because since we bought it, it's doubled in price and just remained high. Now, why am I bringing that up? Because this is the definition of being proactive and just you can't just buy and hold and which did great also in 2022 as well while the markets were down relative to how everything else was doing as.

So you have to continue to analyze these things as we're frankly doing now, because now the s and p has a 5% exposure. We have a 3% exposure on top of that. So technically we have an 8% exposure, which is kind of back to its normal highs. Should we be reducing that allocation? I don't know. That's part of our investment committee members to make that decision as I'm a part of.

But the point is this, this is the type of mentality you have. You have to look at bonds. We've been saying for a long term, stay for a long time, stay short term high quality. Well, wasn't that amazing advice in 2022 when bonds were down 15% and it just kept going up in value. Absolutely. It was great advice.

Well, now you got the 10 year treasury at three and a half percent. You got the one year treasury at about four and a half to five, and you got the three month treasury over 5%. So now what do you do? Especially as our feds are continuing to raise, These are the type of conversations that are crucial.

There is no right answer, but you have to have a strategy and a plan because things change. And what I see more times of not are people are not adapting. People are not changing. People are not executing. They just don't know. They're just putting money blindly into their 401k. This is. You have to be smart about this.

This is your future. You can't just think the markets are gonna take care of it of itself. You saw what happened in s and p 500 from 2000 to 2009. Well, guess what? Same thing happened into the emerging markets index from 2009 to 2019. It's virtually was flat, barely did anything. The market's s and p significantly outperformed more.

Historically. Emerging market is academically proven to be the highest expected rate of return, invest. I just don't see how people who are just buying and holding and something like that are, are pleased with their performance. I have a saying, you can't afford to be cheap, and sometimes people just take little advice here and there.

They could have heard it from Forbes, they could have heard it from blooming, uh, Bloomberg or Club pls or Fortune Magazine of what funds to buy into and what you should do and why, but then they never follow back up to see if it. A good idea. Same thing with these star ratings on Morningstar. All it is is top 20%.

I could argue to not buy the five star funds, but to buy the two and three star funds. Why? Because you're buying something at its high. Of course it outperformed. It was high, but as we know, do you wanna buy high or buy low? I could argue the two and three star funds you get to buy low. You get what I'm saying?

By the way, folks, if you're just joining me, you're listening to Gabriel Sheen, certified financial Planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal. By the way, if you're joining me on this webcast, which is uh, or you're able to see, uh, actually the radio show, you're able to see it on YouTube.

Uh, you can see I'm in a new office over here, so it's gonna be looking nicer from time to come. So we're doing some remodeling here, but this is just a little bit more private and quiet new studio that we have with better lighting and so on. Bear with me as there will be some changes as well. So, uh, I do want to go over a question that received.

So for example, if you guys have any questions that you want to ask, send it to radio@falconwp.com. That's radio at Falcon. wp.com. We'll be able to address those questions, ask those questions on air. So this one came specifically from Melissa in Diamond Bar. She asked a question, what's the best way to get started with investing?

So simple. Okay, so you just want to get started. So it's great to see I average listener sometimes listening is 40, 50, 60 years old. So it's great to see. I'm gonna assume that Melissa is maybe in her twenties, maybe even thirties. Heck, it could be forties and fifties. Let's not discriminate against people who just want to get started sad.

So what is the best way to do that? Well, first off, you have to un see, it's funny, I could turn any simple question into a. Complicated answer and question. So let me just address it outside of just asking, uh, giving you advice. So the best way to get started is first understanding what options are available to you.

Let me give you an example. You might be working somewhere that offers a 401k 4 57. 4 0 3 . That is a fantastic way to get started. Why? Well, because you can automatically outta your paycheck save money into that retirement account. And if you are in a positive, uh, or beneficial, uh, situation where your employer offers a 401k at work that has a match, like our company here at Falcon North Planning, they match 4%.

That is fantastic because you put in 5%, or let's just keep it simple. You put in 3%, the company matches you three. You put in $300, they'll give you $300. That's pretty fantastic. You made a hundred percent return instantly. So that is the best place to get started is when you have access to an employer plan.

And for those people out there who are self-employed, that have employees, the state of California and other states across the country have implemented a mandatory savings that you have to offer to your employers. I would heavily recommend giving us a call if you're. Doing that. There are pen penalties now for not offering.

Let's continue. Let's say you don't have an option to save into a retirement plan. At work. I would set up, depending on your financial and tax situation, a Roth IRA or a traditional ira. If you're in a higher tax bracket, maybe you look at a traditional. Ira cuz you get a write off for it. But if you're in a lower tax bracket, like Melissa, maybe potentially assuming she's getting started and assuming that she's younger, maybe a Roth IRA makes sense.

Assuming you see your income going up and the trajectory of your income and situation going up over time. Forget the tax deduction today. Go with a Roth. And there are many sites like Falcon Wealth Planning offers where they can, you could start off as little as $10 a month in savings into that Roth or traditional I.

These are great ways to start. And so what do you do once you put money in? A Roth is not an investment folks, it's an account. An IRA is not an investment. A 401K is not an investment. They are accounts. You have to invest it. I would invest growth, focus, stock focus. If you have a global fund or maybe for, for people typically who have under 25.

We recommend a target date fund. What is that? Well, it tells you, let's assume you're 25 years old and you want to retire at 65 years old. That's 40 years from now. Well, we're in the year 2023. Let's keep it simple and say 2025. What's 40 years from now? 2065. Choose the 2065 fund. It's gonna be more growth focused if you're 55 and wanna retire at 60.

Okay, choose a 2035 fund. They keep it pretty simple. These are fantastic ways to get started. Once you have over $25,000, it's important to probably look for additional diversification, cuz those are kind of just set it and forget it and they're not making proper movements yet again, as we talked about earlier.

So once you start having 25,000, you can actually build your own portfolio with the four options that you may have in the portfolio. Folks, if you need help with this, Feel free to give us a call. Melissa, you included. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the bird and Diamond bark, California.

We got an office not too far from you, so we'd love to help folks. This was a fast, fast. Thank you for tuning in with us. Feel free to watch any of my podcasts sign up, more Knowledge, more Wealth, or Spotify, more Knowledge, more Wealth, where you can get this episode or any one of our previous episodes. And if you have a question, please send it in to radio falcon wp.com.

That's radio@falconwp.com. Most people have just been sending emails, but you can also send audio clips by just recording it on your phone and sending it straight off and would even be able to play. On air. Just please don't put your last name in there and just say the city and state that you are from now.

If you want to help relate this show to your specific situation, we can do that. Like I said, we've got offices all over. We help nationwide. Give us a call. We'd love to help. Our phone number is (855) 963-2526. That's 8 5 96 Falcon like the Bird, or visit our website@falconwealthplanning.com. That's Falcon wp.

Do. For sure we can help put a personal, confidential and have a conversation to really answer all the questions that you may have. We appreciate you tuning in. We want you to have a fantastic weekend. Have a great week and God bless.