Ep 178: Reviewing 2022 - More Knowledge More Wealth

Transcript:  This is more knowledge, more Wealth with your host, Gabriel Shaheen. Gabriel is a certified financial planner and a registered investment advisor at Falcon Wealth Planning. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the services or securities discussed are suitable for any investor.

Investors are advised not to rely on any information contained in the broadcast in the process of making a full informed investment decision, more knowledge, more wealth. Now, here's your host, Gabriel Shaheen. Good day. This is Gabriel Shaneen, certified financial planner and your host of More Knowledge, more Wealth here and every weekend talking about all important topics of personal.

Our job 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 anyone of our 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.com for short. Now I'm the president of Falcon Wealth Planning. We are a fee only non-commissioned true fiduciary folks. We help clients all across the country. Folks give us a call. We are offering a free financial assessment to really help relate this show to your specific situation.

Our headquarters is here in Southern California, but we. All over. Doesn't matter where you are, folks, give us a call. We'll help identify where you are today, how retirement looks like, taxes, investments, estate planning, insurance, folks. You name it. Anything that involves a dollar sign, folks, our phone number is (855) 963-2526.

That's 8 5 5 96. Falcon like the Bird folks, there is so much to talk to you about. , especially with just coming off what's happening so far the year and just reviewing yet again, what happened last year. Now when you take a look at just what's happened this past January now when you look at the stock market and you look at the returns that happened this year and historically speaking, okay, when it's 58 years, where January had positive years in the market, okay.

A majority of the time, almost 80% of the time, the stock market ended positive with an average rate of return of 12 and a half percent for the year. Okay. It's just important to note, because we had a return of over 6% in the month of January. Now, first question I have is, did you have a 6% return or were you in all cra uh, all cash because you were scared of the earlier crash that happened in 2022.

So a lot of the problem is people. Low. They don't sell high. Okay? That's the problem of really being able to react and improperly reacting to what's going on in the market. You're worrying too much about the politics. You're wearing too much about what's on the news. You're wearing too much about your accounts.

When in reality, you gotta think long term. Your time horizon because you retire in five years is not five years. God, willingness the next 2, 3, 4 decades from now. Your time horizon and your goal of investing should be your money to last and be able to maintain your lifestyle and for some of you maybe increase your lifestyle.

But the problem is a lot of you all went into cash cuz of what happened last year and when you take a look in the stock market, when you look at the past few years of what's happened in the stock market, majority of the time it's positive and the ending 11 months. the, the next 12 months after January, for a majority of the time we're talking, 80% of the time is positive.

What happens in January, regardless if it goes up or down in the first periods. And so when you wanna look at, especially with the Fed right? High, uh, rising its rates, raising its rates. The performance is extremely important here because the importance of how much the Fed raises rates is key. There is an oversimplification that asset class returns have an inverse relationship to in interest rate increases.

The size of the rate height tells you more about the direction of the interest rate moves folks, and you can see this simply on just what's going on from long periods of times. We're talking. 50 plus years ago, and what happens in the subsequent months. So we've talked about this in the past, folks, and that is, Whatever the Feds decide to do.

You gotta think the stock market is the smartest thing that's out there. So let me simplify it. This, it knows in advance of what's gonna happen. Now, the federal government has told us they're only gonna raise rates Q2 to Q3 of this year. So they already told us that. Okay, so now the markets are starting to react.

That's what you saw in January and you're starting to see some calmness right now. Not calmness before the storm, but you're trying to see the stock market right now trying to subdue itself because it knows. The markets are going to slow down and the rates are gonna slow down what the market says. At that point, it recalibrates.

Now, it has a new baseline, it has a new setting. And what happens from there is companies now have a known. number to work with. So how they can properly forecast and run their business. The issue before is they were raising rates so fast inflation was going up so much. They were only supposed to raise rates 1.5% last year, and it went over 3%.

So the point is, is now they're able to have some consistency and you're seeing that with inflation. Calming down and rates now calming down. 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 topics of personal finance.

And today we're just talking about. The basic premises of what's happened in the markets today, and taking a look at the interest rate hikes that are going to eventually be slowing down in the Q2 Q3 of this year, and what you should do about it. The problem is most people are just reacting based on yesterday's news.

Nobody's really proactive these days. I noticed that a lot. Most people are just hearing what they're nuis and depending on how it makes them feel, they make a decision when in reality you should be making a. economic discipline decision. You know, now, you know the markets are gonna go up over time, right?

That we're, that's a benefit of capitalism. Now the issue is most people get. , greedy and fearful and act incorrectly. And you actually see this in multiple forms of DALBAR studies. Now, DALBAR is a study that measures how you do compared to the markets. It sees inflows and outflows for retail investors like yourselves.

And when you look at the performance over the. 10, 20, 30, 40 plus years of analysis and research. It shows how your performance is done, how you miss the best days in the market, how you were invested during the worst days of the market and your timing improperly. And you hear this all the time, nobody out there can time markets.

Nobody knows when to buy and when to sell. And guess what? If you're sold, congratulations. If you sold January of 2022, good for you. Well, why didn't you buy in when it was down 40? What were you waiting for? Stock market to drop 80. Think about that for a second, that that's why nobody in the history of the world can consistently.

be able to choose individual stock in time markets. And because you cannot do those two things consistently, we recommend stay invested. Now, that doesn't mean you're all a hundred percent in stocks or the US stock market or US large cap like Dow Jones at s and p and Nasdaq. No, that's. Not what I'm saying.

You need to be globally diversified. And what we see more times than not is people aren't, they're chasing the next shiny thing that's out there and investing in that. And that's just so improper to do. And that's shown in your, in the Dab bar study, showing where the markets have done 10, 11% over these 20, 30, 40 year periods.

And individual, individual investors have done a whopping. 4%, which is sad if you think about it, and this is why some people say paying a professional one to 2%, oh my gosh, that could be so expensive. Now, I do agree you shouldn't be paying any commissions, but to think that you're overpaying for a 1% management fee when you've missed out on potentially 7% plus return by doing it.

That's insane. And another, another thing, people say, well, I can just buy this P 500 and be fine. Well, if that's the case, imagine doing that in 2000 to 2009, that 10 year period, you would've been down 1% over 10 years. Your compounded rate of return. It was not very good. Your total return after the 10 years, your million dollars was now worth $900,000.

You get what I'm saying? So it's all about being proactive and globally diversified. And we see this all far too often, folks. And if you need help with this, if you wanna just take a look at your situation just to see if what you've been doing is accurate and more importantly, how we can help answer these questions on the investments on the tax, on financial planning on estate.

On whatever it involves, a dollar sign, folks give us a call. We're offering one to two meetings. One to two hours of our time. Folks at no cost. Folks, we would love to help. We have offices all over. We have our headquarters here in Southern California. Give us a buzz. 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 would love to help you point you in the right direction of what you should be doing because investments is one side of it. , but as tax seam seems to be year round, but is amongst us, this is where you really should analyze of what strategies are available to you.

Because taking a look at what happened during last year and the market's dropping my, I bet you even if you were a buy and hold person, you probably were not taken advantage of any tax strategies that were available to you, such as processing your required minimum distribution while the market is low.

Now I know what you're thinking. Why would I sell low? I didn't say. , you misheard me. I said process. Your required minimum distribution. You transfer out shares out of the IRA and let the rebound happen outside of the retirement account in a brokerage account, which oh, by the way, is lower tax rate, right when you take it out of ira, it's tax at your ordinary income tax bracket.

When you take it out of a brokerage and sell out of a brokerage account, you only pay taxes on the capital gains on what you made on the pro, on the, uh, . So these are simple concepts that I don't see people doing, and I don't blame you. You don't do this every day, but to think for a second that there's no other value outside of investment management is sad.

But you know what I'm here to say? You are right. And the reason you are right is because most firms that are out there only focused on your investments. They're not allowed to give tax advice. They actually say it pretty simply, and you've heard this before, please consult with a tax advisor. I used to say that prior to starting Falcon Wealth Planning, almost 10 years ago, I used to say Consult with the tax advisors.

Well, I was so fed up saying that mostly because I was more competent than the tax advisors because they're tax preparers. You meet with your accountant once or twice a year. You don't meet with them multiple times throughout the year. You know why? Cuz that's a tax planner and you need to meet with your tax planner multiple times.

You don't wanna meet with your account in February, March, or. because that's from last year. You wanna be able to talk to them? Na uh, by the end of the year. You wanna talk to them now? For now, you wanna talk to 'em in February or March of 2023 for tax year 2023. Well, who you're meeting with your accounts now, but that's for 2022 and a lot of those strategies ended December 31st.

I see it all the time. Folks give us a call. We would love to help. Our phone number is eight five five nine six three twenty. 26. That's 8 5 5 96 Falcon like the Bird. Folks, we would love to help put a personal assessment for you to help answer the questions that you may have. Cause investments is one side of it.

But we had a talked about other strategies that are available for you, such as tax house harvesting, but I'll tell you exactly how that works too. But we're gonna take a quick break. We'll be right. After a few words, this is Gabriel Shaheen, certified financial planner, your host of More Knowledge, more Wealth.

That's on every weekend. We're going over all important topics of personal finance. We're going over retirement planning, making sure you're prepared for retirement, social security. And strategies, real estate taxes, avoiding them now and in the future, investments, reducing fees, commissions, and so on.

Insurance and estate planning. Folks, we are offering a free financial assessment that you could take advantage of. We have offices all across Southern California, including the Inland Empire. Give us a call to take advantage. It's $500. Offer our phone number's (855) 963-2526. That's 8 5 5 96. Like the bird, or visit our website, falcon wealth planning.com.

That's falcon wp.com for short. Enjoy the show. We look forward to serving you.

Welcome back folks. This is Gabriel Shane, certified financial planner and you're host of More Knowledge, more Wealth here on every weekend. And we're talking about all important topics of personal finance. And today I was just talking about the stock market and how January was such a good time in the stock market of 2023.

And when you take a look, historically speaking how the Januarys are about 50 50 of being a good or bad start to the year, it's half of the time it loses money. Half of the time it makes money, and that's over the past almost 15 years. But when you look at the subsequent 11 months after January, historically speaking, over 80% of the time, it is a positive year.

And that makes sense because of the market. Quite frankly, about 70 to 80% of the time is positive. It does well, it performs, which makes sense. Most of the time, all the time. It feels like outside of certain periods, like during Covid and last year and. , which is 2022, and you're in the great recession, it retracts, it goes down.

But historically speaking it goes up. Why? Because you and I work for, uh, paycheck , and your employers also work to make money. And this is why capitalism, when you look at people have in control to grow. And I know they say sometimes that can become greedy, and that's the. Bad part of capitalism, but when you focus on the good, this is why people invest in global markets, especially in America.

Because of that simple fact, we allow companies to be profitable and to continue to grow, and we like to participate in that. The problem is most people don't know when to buy and when to sell, and they try to buy individual stocks and individual stocks are. until they're not great. You get what I'm saying?

Until they go outta business. Enron was great until it wasn't and went out of business. Same with Sears. Same with Macy's. Same, which is, you know, these are companies that are dying here, and so they're not keeping up with the times. Every company is great until it's not. . So my comment to you is that's why we recommend indexes.

That's why we're telling you to get a globally diversified portfolio. Don't just buy the s and p 500. I hear people say that all the time. How did that do from 2000 to 2009? It didn't do well. Your million dollars was 900,000 after 10 years, so you have to stay diversified. But the problem is people fixate so much on fees and costs when I'm here to say.

Most individual investors who don't have a professional, this is shown in the DALBAR study. You can easily look that up. Perform over a 30 to 40 year period, 4%, where the market does almost 11% returns. And this is sad because people say it's expensive to hire a professional. I say, try doing it yourself as an amateur.

You're getting 250% less returns by doing it that way, right? 4% almost versus 12. And so you have to factor. other contributions. What value is this person getting for managing the money? And this is why we talked about tax planning and tax strategies. Now, I wanted to highlight on tax house harvesting last year in 2022 was a fantastic year to do some tax house harvesting.

Why? Because the market dropped. You're able to capture losses on the way down without actually losing the. . You can sell your Pepsi and go buy Coke. You can sell your UPS and go buy FedEx. Go sell Johnson and Johnson and go buy Pfizer. You get what I'm saying? By the way, those are not recommendations. What I'm here to say is you have to sell and rebuy something.

Here's the key word, similar by doing so, which by the way, only matters in a brokerage account. You can't do it in an ira. Why? Because in IRA you only pay taxes. When you take it out a Roth, you can't do it cuz you never pay taxes. This only works in a brokerage account. By doing that, you're able to write off those losses against your ordinary income, which is a little tax brackets you see from the 10, 12, 22, 24, 32, 35, and the 37% bracket.

But the capital gains rates are always. Sumi Gus Health for over a year. Uh, you are able to realize the gains at a lower rate, but the losses you could write off against your ordinary. Income. This is crucial, folks. Yet again, why is it crucial? It's crucial because this is a key contributor to saving money in taxes.

You write off against your ordinary income, but you repay the gain the tax at a preferred tax rate, which is always lower when we're talking stocks here always lower than your ordinary income tax bracket. This is what I'm talking. Which is why advisors say, please consult with a tax advisor. Cuz most people don't understand that.

Most professionals don't understand that, which is why they're not legally allowed to give you the advice. That is the benefit of having in-house tax. That is the benefit of being tax planners, and that is the benefit of being true comprehensive in the nature because how are you supposed to manage somebody's money?

How does somebody call themselves a. Financial advisor where they don't even see every aspect of your financial situation. It's insane to me. I mean, your taxes are by far the most important piece of your financial situation. Tells you how much income you have, tells you what tax bracket you're in, tells you what capital gains rates you're in.

Tells you it's ordinary and qualified dividends, which is tax completely differently, but it's the same investment. So you might have somebody trying to sell you something that can get you a five, 6%, but you're paying ridiculously high taxes versus you can get something that's paying you four to 5%, which, oh, by the way, It's a lower rate of return, which yields to a less risk investment, which oh, by the way, could be more tax ad advantageous to you.

You could net more from an after-tax point of view while taking less risk. This is why it's crucial. By the way, folks, if you're just joining me, you're here to listen in to Gabriel Shaheen, certified financial Planner and your host of More knowledge, more Wealth here and every weekend talking about all important topics of personal.

And today I wanted to go over with you just the simple concepts of investing, and this is why we're offering a free financial assessment to, again, one to two meetings, one to two hours of our time, folks at no cost. If you need help, give us a call. We would love to help. Our phone number is eight five five nine six three.

25 26. That's 8 5 5 96 Falcon like the Bird. We're happy to put a personal confidential assessment for you to help relate this show to your specific situation. Folks, we would love to help out. By the way, feel free to listen to the show and we're on repeat, or every week on our podcast or on Spotify.

Where you can listen to this show and even speed it up at 1.5 if you really, like, if I'm talking too slow for you. I'm sure I get that a lot. Right. So, uh, , but let's focus yet again on just the key characteristics of the conversation. And most of the time when you see the inflow and outflow of investing, you typically, historically speaking, will do better if you do the opposite of what the herd mentality.

Now from a herd mentality, this is where people all sell out of bonds. At the worst timing. When it was down 15%, when the stock market was down 30% or so, depending on the industry, everybody sold. Well, if you look at what professionals. Would do. And what we're recommending for you is depending on your situation, it may make sense to go ahead and buy in at that point in time.

Now, if you were disciplined, you would do that without even knowing it. How through something called a rebalance, if you're in portfolio is truly half stocks, half bonds. Let's say you have a million dollars and half of it's in stocks, half of it's in bonds or fixed income, whatever you want to call it.

Well, if the stock side. , let's be extreme here by 50%. You don't have half a million of stocks anymore. You have 2200 50,000, which means if assuming your bonds stayed the same, now you have still the 500,000 of bonds, which means you are one third. to stocks, to bonds when you should be 50 50. So that's where you're supposed to sell more on the bond side to buy into the stocks.

Now here, it's where it gets complicated. You have a year, like last year where bonds were also down 10 plus percent. So what do you do? What do you sell? Well, this is where sometimes you have three options. You could do one of three things. When the markets are moving, it's either the market goes up and something up goes higher, so you sell high and buy something that's not as, sell high and buy low is the initial term.

Now, that's the second thing that can happen. Something goes up, something goes down, sell high buy low, which is, think about it what every single investor in the history of investments wants to do. But how come you don't do it? You're letting it ride. You're doing an auto quarterly rebalanced on your 401k, which is crazy to think about.

The third thing is you sell low and buy low. . Now when you look at the rebound that's happened. Bonds have had a pretty good rebound. Stocks have had a good rebound. Of course, then you have February. That wasn't that great of a rebound on the stock side. It's actually been a bit volatile, but volatility is to be expected going forward.

But volatility can be your friend if you know what you're doing. And sadly what we've seen, most people don't know what they're doing. . We're recommending that you take a look at your situation, reevaluate each holding that you have, because not all asset allocations are the same. Some still have junk bonds, some still have high yields.

Some still have, which are junk bonds. Some have long-term bonds. Some have treasury inflated protected securities, which are called tips. Some still have a heavy weighting in tech versus others. Somehow value tilted. Some are small cap tilted, some are sector specific. some add alternatives in there, like energy, like what we did.

We've been in energy for a few years now. Thank God we have. It was a fantastic investment. Some have REITs in there, some have hedge funds, private equities. My point to you is you have to be able to identify. Your situation and execute that accordingly. What we see more times than not, people don't, they do a herd mentality.

They buy something that they sell in bro barons or something that Kramer said on dv, which is insane to do cuz that has no customization to you at all. You're literally just following the next shiny thing. . This is why it's crucial to speak to a professional, somebody that knows what they're doing, somebody that has a vested interest to do what's in your best interest.

And this is what we call true fiduciary. There are commission based advisors there. They only get paid when you buy something from them. Well, that doesn't seem like a comp. Avoiding conflict of interest. There's fee based people that can charge a fee or sell you commission based product. Well, that's hard to identify or there's.

Only option, which is like us at Falcon Wealth Planning, where we only get paid directly from our clients. Why? Cuz we sell brain. That's what we sell. And so we only get compensated if you decide you want to hire us, but we are offering a free financial assessment where we'll give you one to two hours, one to two meetings of our time, folks with no cost.

Give us a buzz, we'd be happy to help. We have offices all over and we help people nationwide. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the Bird, folks. Folks, we are gonna be going strictly to podcasts and Spotify's. Going forward, okay. Please be able to turn in. We've had a heavily request and majority of our followers and listeners are already hearing us on podcasts or on Spotify, so we're excited to help you guys.

We're excited for you to continue to listen to the show, and we may be coming back to the radio here sometime soon, but we're strictly gonna go on podcasts going forward. We wanna thank you for tuning in with us this weekend. Please feel free to reach out to myself or any one of our colleagues here at Falcon Wealth Planning.

Our phone number is eight five. 9 6 3 25 26. That's 8 5 5 96. Falcon like the bird, or visit our website@falconwealthplanning.com. That's falcon wp.com for short. I wanna thank you for tuning in. I wanna wish you a great week. Have a great weekend and God bless.