[00:03:12] Jason Jacobi: Graduating school, like a lot of millennials and Gen Z these days, right? But started at a Fortune 500 financial company, which was local in Newport Beach, California. Really kind of learned the industry cause I had no financial background whatsoever. I was, grew up in the hospitality industry, like hotels and restaurants.

[00:03:30] Jason Jacobi: So long story short, got all my licenses that I needed that I didn’t have at the time, and then became a certified financial planner this past year. Which is a fun way to round out our services. So we don’t just do the investing piece, we do the financial planning piece as well, which is huge.

[00:03:45] Jason Jacobi: And then the ongoing coaching advice and guidance side for our clients too. We’re pretty hands. 

[00:03:50] Rebecca Hotsko: And I want to dive into all aspects of that with you today because to create a really holistic plan for ourselves and for investors who are doing it themselves. I think we sometimes forget about the planning aspect, but I do want to start off with markets what is kind of your current outlook and assessment for the markets going into 2023?

[00:04:13] Mark Boyer: Yeah, we’ve had a rough year, obviously this last year been really difficult you know, had a big run up into late 2021. And so based on all the things that were happening coming out of Covid, we were not surprised, especially with the money that was added into the system the relief and so forth.

[00:04:30] Mark Boyer: That, and then as Covid ended, We weren’t surprised that the markets had moved up pretty substantially as we went into this year. We were very cautious. We knew that we were dealing with high multiples and you know, that the market just looked to be like it was going, didn’t be expected to go down and be, as, you know, bad as it has been this year, but at the same time knew that there was going to, it was not, it doesn’t go up every year, right.

[00:04:52] Mark Boyer: So there’s just times where you have to be more defensive and adjust your portfolios and so forth. This year has been really interesting, especially as it’s been raising rates Fed, just based on the recording here, just raise rates again yesterday, 50 basis points. So we expect the Fed to continue to raise rates going into this next year.

[00:05:10] Mark Boyer: The question is, and the concern is for us, is that. They have a long history of overshooting in the past. You know, the Fed continues in their hawkishness. We’re not sure they’re looking at the right numbers necessarily. There’s a lot of things that they’re looking at that are lagging indicators, and thus the concern is they’ll continue to raise rates, albeit a smaller or lower rate going forward.

[00:05:31] Mark Boyer: But they are going to do it nonetheless. So, you know, after we get. Holiday seasons here and into the beginning of the new year really feel like the consumer’s going to pull back. They’re going to, they’re going to pull back spending and mortgage rates are up and so forth. So it’s going to be a challenge and we think that especially the early part of 2023 will continue to be volatile.

[00:05:50] Mark Boyer: We’re unprecedented, we’re not. I’ve been in this business a long time. Volatility is a part of the market. We get bear markets about on average every six years. You know, 80 years of investing. And so it’s not unusual to have markets like this, although sometimes investors who are relatively new aren’t used to that.

[00:06:07] Mark Boyer: And I know we’re going to talk about that more later in the, you know, the behavior part. It’s just hard to, you know, like I’m not used to money going, you know, my investments going down and that’s just a part of investing because nobody really knows what tomorrow’s going to be. So we think it’s going to be more volatile, but it’ll be really key, especially for folks who are investing to maintain their long-term perspective and kind of what their goals.

[00:06:28] Mark Boyer: And what their purpose is of what they’re investing and how long how long they have, because it’s going to be volatile here. We feel like we’re entering a recession if we are not in one already, which we can think we’ve been in a mild one. And the question will be is how deep it’ll actually go. 

[00:06:43] Jason Jacobi: And Rebecca, if I could just piggyback off that for a second.

[00:06:45] Jason Jacobi: So I don’t know if the listeners know this, but usually when rates are increased, especially at the rate that they have been, it’s not like that they go into effect tomorrow. It takes months at a time to bake into the economy. So even though the rates were raised yesterday, Another 50 basis points.

[00:07:01] Jason Jacobi: We’re not going to feel that probably for another quarter at least. So we’re already seeing the economy slow down, like Mark said, if we’re not already in a recession, we’re most likely going into one here. Could be an inch deep, but a mile wide. So meaning it could have a longer duration. But that’s to be seen.

[00:07:16] Jason Jacobi: Nobody knows kind of what the market’s going to do in the short term. I mean, you saw today had a decent, you know, day yesterday, the markers were pretty wild for a little while after the announcement we were up and then we were down and then up again. And then today it was I’m looking at the numbers right now, you know, two and a half percent on the Dow S&P two and a half, and then the NASDAQ almost three and a half percent down today.

[00:07:37] Jason Jacobi: So you’re going to have these wild swings. In the meantime, as investors digest what’s going on in the markets, specifically going into the new year. 

[00:07:45] Rebecca Hotsko: Yeah, that’s a really good point that you mentioned with it taking that long leg time because it takes several quarters to kind of make its way through different parts of the real economy, and this gets into the first topic then what I wanted to talk to you about today is when we hear the importance of investing early and often, and the best way to build long-term.

[00:08:09] Rebecca Hotsko: Is to have more time in the market. But on the other hand, it’s really hard to adhere to during these hard times, during these down markets, and especially if we expect it to persist, like you just mentioned, it could for the next couple quarters the next year. So I guess I’m just wondering, what advice do you have for our listeners who are maybe holding onto more cash right now?

[00:08:29] Rebecca Hotsko: They’re being defensive or sitting on the sidelines because they’re just so uncertain of what’s going to happen. 

[00:08:36] Mark Boyer: Yeah, I mean it’s it’s a scary time. I mean, like I said, it’s no fun when you feel like as soon as you invest some money you lose 3% like we did today. If that happens, so people, you know, again, you get pretty nervous.

[00:08:47] Mark Boyer: I think what we always stress is that you gotta be in the game, though. Time in the market is more important than timing the market. Bottom line is as you look at your situation, as you assess what your game plan is and what your purpose is for, again, the money that you’re saving for, you’re trying to do with those.

[00:09:03] Mark Boyer: Whether it be retirement, it could be long term. Right? It’s interesting when you look at speaking of retirement, you know a lot of millennials watching this, right? So they got a long time to go for retirement. It’s really interesting. Run lots of studies and done some research on this, but as you look long term, you know, if you were a person who.

[00:09:20] Mark Boyer: Invested 10,000 a year, the last 20 years, and you had really good market timing and you happened to invest at the right time every year, that 10 grand, the market low, you would have a return the last 20 years of about 12.2%. But if you were like, I am sometimes where we can’t be, where you’d not necessarily making the best moves and you actually invested the worst possible time, the high in the market over the same 20 years.

[00:09:45] Mark Boyer: You would be about 10.3%, which is about a 2% difference longer, over 20 years. Now that’s big enough difference to matter because 2% over 20 years is a while, which we, you know, but at the same time, 10% a year is still pretty good.So, point is that especially again, looking at your game plan, what is the, you know, what you’re investing for?

[00:10:05] Mark Boyer: If it’s retirement, it’s you know, we recommend you be in the game. It’s diversification. Once you’re in the game, it’s having that game. Being able to diversify and so forth to be able to spread your money out. So you can always have Bill an all-weather portfolio. So, but you know what, bottom line, Rebecca, there’s a lot of, you know, some folks, it’s hard to get them to do anything at this point, but we, if anything, you should be dollar cost averaging into this market.

[00:10:30] Mark Boyer: Cause you’re not going to be able to know when those lows and when the time is. So another way to do is if you got some money over the next six months or so and you want to invest it. Do some, do a portion of it every month or so at that same time. And that’s always helpful too. 

[00:10:44] Jason Jacobi: Yeah. Just you know, echo what Mark said.

[00:10:46] Jason Jacobi: You know I think one thing to mention, obviously Mark mentioned timeframe, the age of the investors the financial profile that we build out for each individual client is really important. And especially for do-it-yourself investors, right? If you’re trying to buy a house, which right now with mortgage rates so high is probably not advantageous, but people that have cash sitting on the sideline where you could actually earn a pretty decent return, which you haven’t been able to do over the past you know, at least a decade, you can put it into, you know, a one year T bill in earn over 4%.

[00:11:14] Jason Jacobi: And if you’re on a shorter timeframe, that probably makes the most. But like Mark said, with long-term money, you know the market is not only going to outpace inflation, but do pretty well for you 10% year over year. It’s very attainable. If you look at the history of the S&P. 

[00:11:28] Rebecca Hotsko: It’s so interesting, mark, that you mentioned those statistics, because I actually did an episode a little while back now it was called Time in the Market Verse Timing the Market, and I referenced a study, it might have been the exact same one honestly, that you talked about where if you’re a perfect market timer, which is pretty much impossible to do, your returns.

[00:11:46] Rebecca Hotsko: Aren’t that much better than if you dollar cost averaged or you are a lump sum investor over the very long term. It matters in the short term, but not if you’re an investor with a 20, 30, 40 year time horizon, which we’re going to get into. But that is one of the main goals why we’re all investing. It’s to fund our retirement and those very long term goals.

[00:12:06] Rebecca Hotsko: And so these year to year fluctuations, they hurt. But in the grand scheme of things, if you remember your game plan, then it doesn’t matter that. But I do want to talk about asset allocation first with you and having the right mix of assets, because that’s really important to our risk profile, but also just weathering these different market cycles.

[00:12:26] Rebecca Hotsko: And so how would you guide someone in determining what asset allocation is suitable for them? 

[00:12:33] Mark Boyer: It’s case by case. Every person has a different objective and a different goal. Again, time in the market, right? If you look at one year periods of time, you put your money in a particular time of a year and a year later, you look at it.

[00:12:45] Mark Boyer: What’s very interesting you basically have about a third of a chance that you’ll be down on your, if you look at a long time frame, but you have a 33% chance of having lost money over that period of a year. If you look at, if you go out three years, You know, it comes down to like 15% over five years.

[00:13:01] Mark Boyer: It’s nine. And then over a 10 year period in a well managed investment portfolio, there’s almost a zero times where you’ve actually lost money over that period of time. Even that even includes like the consider, you know, we talk about the lost decade, right? The two thousands, which I lived through from like 2000 to 2010.

[00:13:19] Mark Boyer: You know, that’s the S&P was basically flat, a good managed portfolios. See and looking at history that actually did okay. And again, it’s diversification in that. So what we try to do in those situations, again, analyze the timeframe we have. When you’re managing money, the way you manage it is diversification is reduces risk and other ways just, you know, having that timeframe and determining what that is.

[00:13:41] Mark Boyer: And like Jason was just talking about, if it’s a short term timeframe, you don’t want to be in the market because you’re, you have a good chance, especially right now, we could be down a year from now and that’s still possible. Nobody knows what Buffet said in 1988. We have no idea where the markets will be a year from now.

[00:13:55] Mark Boyer: We don’t even try to guess that because they just, he continues to just stick to the investment principles that they believe long term and dividend growth, things like that. So it’s really important in those places, in those situations to really analyze what your goal is and then have an asset allocation, whether that’s.

[00:14:10] Mark Boyer: Long-term large cap equities, a balance with small caps international which a lot of people miss out on, which hasn’t done that great here recently, but with a strong dollar and the chance that comes back down, international could be really good place to be, even though Europe and some of these places are not doing very well.

[00:14:29] Mark Boyer: The market, the dollar just comes down in value. I mean, you’re going to benefit in those types of investments. So again, all-weather portfolio. And then don’t forget fixed income, that’s another place that this year has been a ugly place. And growth and income type portfolios this year with bonds have not been good because we have historic, this year’s been historically bad for bonds, but now with the interest rates where they are, they’re looking like they could be more based on history, better stabilizer in a portfolio.

[00:14:55] Mark Boyer: So we like that. . And even looking at the, again, back to the lost decade, it was interesting to see that in that lost decade of the early two thousands, that bonds averaging about 5% a year over that period of time that S&P was flat. So again, if you got a diversified portfolio, all weather, you’re going to always find something in an upcycle.

[00:15:14] Mark Boyer: That if you need money, that’s what you’re trying to do. Diversification in all. 

[00:15:18] Jason Jacobi: Yeah, and just to piggyback off that I think an interesting stat or interesting kind of asset class that we are, market capitalization that we forget about is mid-cap, right? It’s a a lot of time people talk about large cap, whether it’s growth or value or blends or small caps, right?

[00:15:34] Jason Jacobi: The companies like, I always talk about like Amazon in, in the garage when Bezos started Amazon. There’s companies that have potential to, to grow and be big money makers and be the next FANG companies basically. But if you look at mid-cap equities, they’ve actually outperformed large cap and small cap equities over 50% of the time.

[00:15:51] Jason Jacobi: So it’s important to have a diversified portfolio regardless of age, right? Don’t put all your eggs in one basket. Consider the time frame like Mark said and all those things. But having things that are even out of favor right now and having the foresight to hang through it and stick to it. Because even in an international, like Mark said, currency plays a big role in that.

[00:16:11] Jason Jacobi: I mean, you’re up in Canada, right? I mean, so you understand that quite well depending on where you travel to, right? You come to the US. A strong dollar, your money doesn’t go as far. And whereas we, if we travel to Europe right now, you know, it’s almost a one-to-one ratio with the Euro or the British pound, so it could compound your compound interest depending on where the currency is at that point as well.

[00:16:33] Rebecca Hotsko: I think that’s a really good topic that I wasn’t planning on getting into today, but it’s something that I haven’t touched on yet on the show. The currency risk aspect of investing, because we have a lot of global listeners, and so when they’re investing in US equities or if a US investors is investing in a foreign equity, can you talk a bit about that currency risk aspect of the investment?

[00:16:57] Mark Boyer: Yeah, so I think that, you know, again, we want, in our situation, we’re always looking at it from being mostly, like you said, US investors who are looking outside to see what are opportunities in other parts of the world. And so again, because of the dollar strength this year, due to the world looking at.

[00:17:14] Mark Boyer: The dollar is kind of the currency. There’s been a lot of strength. The dollar is really rallied this year to highs that look to be longer term. Again, if you’re looking at from the longer term perspective on the dollar looks to be pretty high, and we’ve seen even in the last six weeks or so, That the dollar has full back and our international investing, those areas where we have those funds are, you know, have really rallied, but at the same time you’re looking at it and they’re, you know, as I look at it, I’m like, wow, the dollar as it, it’s going to come down.

[00:17:43] Mark Boyer: That’s really a positive place. So we, in the last couple months, we’ve actually been adding to those international places in order to take advantage of that, knowing that places like Europe and China and these areas, you know, there’s not a lot happening in their stock markets. But even within, again, even.

[00:18:00] Mark Boyer: the way they adjust and so forth. It’s a matter of if the dollar comes down, it’s really positive for us in, in the long term as it’s held there. 

[00:18:08] Jason Jacobi: And, you know, multinational companies, I think most people forget about, even if you have a US company might have offices based all over the world, right? They gain profits from different countries, whether it’s Southeast Asia to Europe.

[00:18:20] Jason Jacobi: To South America, wherever it may be, right? So there’s currency risk in all of their earnings as well. So when they’re converting their earnings to a specific currency, it could be an additional headwind. So for example, you got a company, multinational companies outside the U are in the US that also do business outside with a strong dollar when they’re actually keeping or retaining their earnings or.

[00:18:40] Jason Jacobi: converting them to the US dollar. It might be a little bit of a headwind, which means pay, you know, might not have as much earnings as we thought we did. So it’s also something to think about. So kind of playing into the recession theme, we’re talking about less earnings means potentially layoffs, which just means less money to spend higher unemployment rates.

[00:18:58] Jason Jacobi: It’s, it could spell more trouble if a strong dollar hangs around a little bit longer. For US companies at. . 

[00:19:06] Rebecca Hotsko: Yeah. I think the largest companies in the S&P 500, I read that over 60% of the revenues is generated abroad. And so it really hurts them when the dollar appreciates this much. And for me and the Canadian listenerS&People who aren’t in the US, it’s a struggle for us investing in US companies when now that the dollar has risen.

[00:19:28] Rebecca Hotsko: So, It makes me think should I be hedging a bit of my portfolio, especially when us still makes up a significant amount of my overall investments. Do you have any thoughts on when it would make sense for an investor to currency hedge a part of their portfolio or does it not matter over the very long term?

[00:19:49] Jason Jacobi: I think it depends on timeframe, right? We kind of talked about that, but you’re a long, in the long term and you see a company that’s got great valuations comparative to what You could have gotten it a year or two ago, I think at that point. Why not? But again, it just depends on the timeframe. You’ve got something short term.

[00:20:05] Jason Jacobi: Again, we don’t know exactly what’s going to happen in the short term. Obviously recently the dollar has fallen. Quite a bit just from what his highs were. Now, is it going to stay like that? Depends, especially with the rest of the world, kind of increasing rates at an equally aggressive pace. There’s other value and attractive investment opportunities out there as well.

[00:20:23] Jason Jacobi: But, so I’ll say over the long term, probably not too big of a deal, but in the short term, intermediate term, it’d be very selective with kind of the companies that you’re going to be investing in, at least outside of your home country, right? Because it could, the currency hedge could play in your favor or potentially outta your favor.

[00:20:38] Mark Boyer: And I would say, I think that longer term, again, to Jason’s point and answering your question longer term, I think it all kind of plays out in a normal average. In regards to, I think the returns come back to normal. You know, you get these highs and lows, but if your timeframe is out there ways it sort of comes back to a median.

[00:20:57] Mark Boyer: I think that in this case right now, what’s been interesting watching international, I remember in the late in the nineties when I start, first started in this business, international investing was the thing to be in. And actually through the nineties it was really popular and you were making money.

[00:21:14] Mark Boyer: And so as you built portfolios, you know, it’s like, hey, you know international and then two thousands, whatever. All in that timeframe, it began to really wane and. That part of the portfolios has been really a lagger to the US markets. US markets have really outperformed over the last 20 years, but that’ll change at some point.

[00:21:34] Mark Boyer: And we don’t know when, again, you are watching the dollar, I think it gives you, you know, that strength in trying to see if. If this is a top on that part, but there’ll be a time where the international will, over a longer term, probably outperform the us. I don’t know when that is. Might not be for a little while still, but again, it’s another tool in your toolbox.

[00:21:52] Mark Boyer: It’s another place for you to diversify where you can have an opportunity. And again, that would’ve been a more positive even in 2000, in the last decade. I mean, international was slightly better than the S&P 500. So again, we don’t know. Nobody really knows. You know, we, like we think we’re all smart and we’ve got all the answers, but the bottom line is, none of us really know what’s going to happen tomorrow.

[00:22:13] Mark Boyer: So because of that, it’s just important to be in the game and diversified and kind of watching some signs of some opportunities, but don’t get so caught up. Make, continue to make sure your portfolio’s well balanced and all weather. 

[00:22:26] Rebecca Hotsko: And so I kind of want to move into some of the behavioral mistakes you see investors make because we’re touching on getting in the game early and often.

[00:22:35] Rebecca Hotsko: And on the flip side then, what are some of the biggest mistakes you see investors make that end up being quite detrimental to their long-term returns? 

[00:22:45] Mark Boyer: There’s a whole bunch of information on behavior finance. I mean, that’s remarkable. I’ll just, the biggest mistakes that people make is getting too, it’s again, I think what buffet is too.

[00:22:55] Mark Boyer: It’s getting too greedy and getting too pessimistic. It’s we have a tendency to get. Extremes on both ends of those. Let me give you an example. I remember in 1999, 2000, you guys were both pretty young, but I was in the business and it was in two, you know, when the tech techs were just running.

[00:23:13] Mark Boyer: And it was funny because, you know, I’d been in the business for about six years and working with people. But it was funny as the later the 1990s went, it seemed like very people that were pretty normal had no background in finance. They didn’t really, you know, they maybe didn’t study in school. They didn’t do what we all, the three of us did focus on it and really spend every day hours of our days working on these things.

[00:23:34] Mark Boyer: There was people that were just working normal jobs and all of a sudden they were day trading and making tons of money just because they bought a.com stock. And I, and it was just like, and the market just was running. You really couldn’t make a mistake in those times. So you had, and I’ll give you a quick story.

[00:23:48] Mark Boyer: In about 2001, in that period of time, my mom, who was, she was about 86 at the time, and she grew up in the Depression, her and my dad, world War ii, he was a World War II vet, and so they walked through a lot of tough stuff and never in their lives had they, once they went through the depression and coming out of that, there was no way had any interest in the stock.

[00:24:08] Mark Boyer: But she had asked me for help when I first got my licenses, I was working, so I had put her in some stuff and we, you know, she had some stocks, but she didn’t really understand what it was. But anyway, one day my wife and I and our two young kids, we went over to dinner and had us over and mom’s talking and she starts talking about, there’s a guy at her church.

[00:24:25] Mark Boyer: Who is trading stocks and he says, mark, I need to be in stocks and buying.com companies and all this kind of stuff. And she said I think it’s time. You know, I think it’s time for me to do that because sounds like everybody’s making money. And I was like, what? I mean my 86 year old mom’s talking about buying stocks, she has no idea.

[00:24:43] Mark Boyer: what she’s talking about and she doesn’t understand it. And I said, look, mom, you’re in a diversify. I got you in some stocks we’re not, you know, blah, blah. I kind of explained to her and she says, okay, mark, I trust you, whatever. But I, my wife and I walked out in after dinner, went to the car and I said, babe, I think we’re at the high of the market.

[00:24:58] Mark Boyer: And she says, why? I says, because when my mom wants to buy stocks, there’s no more buyers left. I mean there’s nobody out there. Everybody’s bought. So it’s just, and I wish at the time I, you know, looking back, I wish should have even believed what I, I thought because that was the beginning of a down trend, because people, you know, when everybody’s greedy, when there’s no more, you get to a place where there’s no more buyers because everybody’s in.

[00:25:21] Mark Boyer: And then that’s just the sign of a top. And it happens on both ends. We make the biggest mistakes of buying at the top. And the other mistake is selling at the bottom, which is, It just happens. It’s part of the behavior finance. It’s just that is the two biggest mistakes and you gotta take the emotion out of investing.

[00:25:37] Mark Boyer: And that’s one of the areas I’ve seen over my many years in this profession. I’ve seen people make those mistakes. So part of our job is to kind of keep ’em level and levelheaded all these things. And so, but there, you still run across that those behaviors. 

[00:25:51] Rebecca Hotsko: It’s so funny that you mentioned that story because it’s so true.

[00:25:55] Rebecca Hotsko: We hear that when everyone wants to buy and everyone feels like they’re a genius. That is when you know to get out and it’s a top and it’s just so anecdotal, but it’s funny how it can be. Quite precise at times, and I think we saw that with the crypto bubble and everything. And so I think that in terms of behavior, it’s hard because we learn from history.

[00:26:16] Rebecca Hotsko: A lot of our listeners are well informed with all of this, but it still hurts seeing it and it’s, I still fall victim to it where it’s, I know about market cycles in history, but yet it’s still hard. And that’s why implementing a rules-based approach so you don’t emotionally buy or sell, can really help in the long term. I think. 

[00:26:36] Mark Boyer: And I think that’s why the discipline of staying consistent is finding ways to stay consistent in what you do. Here’s one of the great examples is like 401ks, right? You’re at work and you just, every two weeks or every month, a percentage of your paycheck goes in a an account, right? And. That’s like, it doesn’t matter where you’re not thinking about it.

[00:26:56] Mark Boyer: The problem is that when people start trying to time it even in those places, because that’s really perfect, that’s a perfect situation if you got, you know, if you’re just continuously putting money in on a regular basis, that dollar cost average and can really be positive for you. It’s when we try to, we get our, again, our emotions get into it and we can really hurt ourselves.

[00:27:13] Mark Boyer: I mean, it’s crazy how much you can hurt yourself by getting too emotional and making those wrong decisions at the wrong time. 

[00:27:21] Jason Jacobi: And it’s tough. It’s tough, right? because human emotion. It plays such a big part in our everyday lives, so investing, it’s easy to say, like, Rebecca, you were saying it’s, you know, we b we all know the historical performance charts.

[00:27:33] Jason Jacobi: We all know time test and investment strategies. That’s why you do what we, you do. We do what we do. We fall victim to it on our personal accounts, you know, sometimes, but our backgrounds, how we were raised to, I have clients that watch their parents lose a lot of money, whether it was the.com bubble or whatever it.

[00:27:51] Jason Jacobi: who are now terrified to be in the equity markets, right? Because it’s what they’ve seen and it’s a personal experience. Investing is a very personal thing. It doesn’t seem like it, but it’s very personal. So if we can remove ourselves from that, and that’s why even I think it’s important as financial advisors for us to have even other financial advisors manage your money because you’re going to get emotional about your own money.

[00:28:13] Jason Jacobi: So whether I have, you know, mark, look at my stuff or whatever, whoever it may be, it’s very important to have somebody that can say, Hey, you know, let’s not jump off a cliff here. You know, I know it’s a normal human interaction or reaction, but stick with the game plan. Stick with the portfolio. You bought this for a reason.

[00:28:29] Jason Jacobi: You’re a smart person. Let’s just ride it out and. 

[00:28:33] Rebecca Hotsko: That is great advice. I wish I had the data in front of me, but I remember reading where if you missed say like the best 30 days, right? Af, or sorry, like after a down market 20 days later, you would’ve missed out on all the best returns and so, , we think we can time things correctly and we’ll just wait till things get a little bit better, but it’s way more likely that you’re going to miss the bottom, and then you’re going to miss all the best returns on the way up.

[00:29:00] Rebecca Hotsko: And that is what we saw during Covid, where I think it took 30 days to go from the bottom to all time highs or maybe just a little bit over 30 days. And so it’s very quick. 

[00:29:13] Jason Jacobi: You’re so right, Rebecca. The biggest days of gains come after the biggest loss days, right? Like you just said.

[00:29:18] Jason Jacobi: It’s time tested. It’s proven. So like you said, if you try to time it or you’re, you can’t stomach it anymore, you get out and then you try time it on the way up. It’s, it, 99.9% of the time doesn’t work out. So that’s very true. 

[00:29:32] Mark Boyer: I was just going to say, I think it’s really important. I think about, I mentioned earlier about a, back in my background in sports and I think anyone who’s played any kind of sport, doesn’t matter what it was, mine was football, but there were times in a game where, The tensions were high.

[00:29:46] Mark Boyer: Might have been the, oh, you’re down by a touchdown with two minutes to go. And we all love watching those games where you watch a quarterback who you know, or somebody like who, the star of the team who’s kind of gotta take control, right? And kind of keep their emotions in check. They gotta be able with the crowd going nuts and TV audience and the whole bit to take that.

[00:30:05] Mark Boyer: And to be able to still do the little things and make the plays to get to be successful in the long term. We love that story. We love this, that cool, calm, collected quarterback or whatever, right? And we love that, watching it, but man, that’s hard to do, It’s just, it’s. It’s difficult, and that’s why there’s probably so few people that can do those things.

[00:30:26] Mark Boyer: But I think as investors, really successful investors, it’s really important to have that same time, that same mindset, to be, to stay cool, calm and collected again, remembering the little things that you need to continue to do. So you know, you’ve been practicing those things and when nobody’s watching, but you stick to it.

[00:30:45] Mark Boyer: And again, those small disciplines that are really important long term. So we love watching it. That’s what hope every investor. Podcast know for our clients, we want them to stay that way because it’s, you’re going to be, you’re going to be okay if you can hang and keep those emotions in check.

[00:31:00] Rebecca Hotsko: I think that was super helpful advice, and I want to talk about your game plan that you’ve kind of referenced a few times now today, and how our listeners can think about building theirs or if they have one, making sure that they’ve done all this.

[00:31:15] Rebecca Hotsko: StepS&Processes, right, to make sure that they’re set up for success in the long term. Because as we were talking about before, a lot of our common goals as investors are these very long-term ones, whether it’s retirement or just whatever is in the future to fund the future life that we want. And so what are some things, the most important steps or processes that you think investors should take to make sure that they’ve built just a well-built plan for themselves?

[00:31:43] Jason Jacobi: So as a certified financial planner, I’m really passionate about this stuff. Didn’t realize how passionate I was when I started going through this certification process. But again every good investment strategy starts with a financial plan. Now, it doesn’t have to be written out, right, especially in an age where tech kind of reigns supreme.

[00:31:59] Jason Jacobi: And it can be in a digital plan. It could be a plan that you write down personally or with your advisors. Just a couple bullet points. , everyone’s plan’s going to be different. It can be very simple, could be very complex, depending on your net worth, your wealth, what kind of debt you have, things of those natures.

[00:32:14] Jason Jacobi: But I’ll give you a brief breakdown of some things that you can go through, like a checklist. So number one, before you start investing, or if you started investing, , go back to this step is having an emergency fund, a rainy day fund. So, you know, in our CFP certificate realm, we always say if you have one income, a single income, or two incomes with a big discrepancy, like somebody that makes a lot and a little and might not be as stable of an income stream, have at least six months.

[00:32:41] Jason Jacobi: Of the fixed and variable outflows of your expenses. So fixed outflows. Think of your normal bills. They’re the same each month. Variable outflows, we always say give a little bit of grace, right? So whether it’s going out to dinner, drinks, shopping trips, whatever it is, give yourself some wiggle room in that variable outflows.

[00:32:57] Jason Jacobi: Combine the two. It’ll kind of give you your total outflows per month. Save up six months of that. Now, if you have two stable incomes your partner your husband, wife, whoever, you kind of share the duty of responsibility of bills with whoever it may be. Three months is usually sufficient. It could be more, it could be less again, but at least three months for two incomes we’d say.

[00:33:17] Jason Jacobi: So, rainy day fund, always have that. Also get rid of debt, obviously, especially in interest rates these days, right? Credit cards, even card debt, whatever it may be. The less debt you have, the more successful you’re going to. Now debt can be seen as bonds or use debt in real estate. There’s different avenues to use it, but in terms of personal debt, wipe it.

[00:33:37] Jason Jacobi: Cassius King, right? Beyond that, then start contributing to a retirement plan, whether it be a Roth ira if you’re under the income limits. If you’re over the income limits, then do a traditional ira. It’s going to lower your income for the year, for your tax implications, could lower your potential tax burden.

[00:33:54] Jason Jacobi: Or if you have a 401k, start contributing, at least get the match right? It’s free money. And then once you kind of start maxing that out, whatever it may, Then you can start doing the individual investing in non-retirement accounts or even breaking up into different buckets, whether it be a down payment on a house or a car or a boat, or whatever it may be, right?

[00:34:11] Jason Jacobi: Whatever your goals are, that’s where you can start having fun with them. Like, all right, this is my fun money. I want to put it into, you know, 5% into crypto. Or, you know, I want to put it into Amazon or Microsoft, or whatever it may be. So those are just some of the basics. Obviously they can get a lot deeper than that, but at least I think the listeners can go with those step-by-step instructions and be pretty successful with.

[00:34:32] Rebecca Hotsko: Yeah, I thought was super helpful. And another interesting topic is thinking about wealth transfers and however, the next couple years or decades, it’s going to greatly impact millennials. Can you talk a little bit about this? 

[00:34:47] Jason Jacobi: Absolutely, we’d love to see Rebecca. So an interesting statistic that I saw recently was there’s going to be between 30 to 68 trillion that transfer from the baby boomer generation to Gen X and the millennial generations.

[00:35:00] Jason Jacobi: Now what does that mean? So how can we incorporate that into our plan? You now, a lot of people that I come across do not take this into account. So you have a lot of baby boomers that will pass away and then all of a sudden there’s really no estate. It’s really important for families whether if you come from a, you know, a well off family or you have parents that have, you know, substantial amount of real estate, whatever it may be, where you have a large estate to start planning for that before they pass away.

[00:35:26] Jason Jacobi: Because you don’t want to be in a situation where, let’s say, God forbid something happens to whether it be a relative or family and for the estate, and they have no strategy put in place, they have no trust, they have no liquidity in their estate. So you have, so for example, in the us, I’ll just use the United States as an example.

[00:35:44] Jason Jacobi: Each person in the US has an estate exemption of $12,060,000 for the year of 2022. So for example, You know, mark has that. I have that. You would have that if you’re a US resident and citizen, you can pass as much assets you want to your spouse. So that doesn’t factor into that. But if something were to happen to the both of you or to you and you weren’t married, anything over that 12 million, $60,000 exemption is going to be taxed at a 40% rate, which is not good, right?

[00:36:13] Jason Jacobi: I mean, who wants to be taxed 40% on their hard-earned money? So then we have to start thinking. Liquidity. You’ve got a large real estate investor. I know real estate investing’s very popular. It’s great. What happens about those taxes that you owe or that the estate would owe, which gets passed on to the executors of the estate and to the funds or the assets that are in that estate that have to pay that, right?

[00:36:34] Jason Jacobi: If you don’t have the liquidity, how are we going to fund that? Again, that’s something to think about, creating the trust, a, b, c trusts, having ’em flow through of being able to utilize bypass. And fund exemptions to make sure that you can mitigate as much of the 40% tax penalty that you would come across.

[00:36:49] Jason Jacobi: And again, gifting plays into that because you have 12 million, $60,000 of gifting available for your lifetime besides the yearly exemptions. So utilizing that as well to get assets out of your estate. So again, all things to think about for millennials are Gen Xers that are going to be in getting a bunch of wealth in the next few years, in the next decade.

[00:37:06] Jason Jacobi: And I would encourage them. To talk with somebody about it or talk to their families, at least trust attorneys, things of that nature is really helpful. 

[00:37:14] Mark Boyer: Yeah. And to reiterate, I think no question about it, and those are conversations that you need to have with your parents. And those I’ve seen so many times where it’s how important it’s been to have those good discussions ahead of time, and nobody wants to talk about those things, but it’s really important to make sure you got all your ducks in a row.

[00:37:32] Mark Boyer: I mean, you know, I got five millennial kids and they’ve all got families and they’re, you know, I tell ’em, you know, you better, nobody wants to think about death and creating trusts and things, but what happens if even something bad happens? Who’s going to take care of the kids? Who’s the executor? Who do you trust to be the guardian of your children?

[00:37:49] Mark Boyer: Those are all important things for you to line up. Also, life insurance, another, we didn’t talk about that, but I mean, that’s really critical for young parents and at least get something covered to replace loss income due to death. So, not popular things to talk about, but again, part of the game plan is to cover all those things so you, you got a full arsenal of opportunities ahead of you.

[00:38:08] Mark Boyer: You kind of thought through every kind of situation. And so that’s kind of the game plan idea, right? And to be able to adjust to what life gives. Yes. So that’s all important. And so yeah, get after it. Don’t wait too long. Good thing to do also at the end of the year, going into a new year. 

[00:38:22] Rebecca Hotsko: Yeah. I’m so glad that you touched on that because we haven’t talked about that yet on the show, and that is such an incredible amount of money and it might not impact everyone, but it’s at least good to be aware of that and to think about starting to plan for some of those things. because like you mentioned, no one ever anticipates that or expects it.

[00:38:41] Rebecca Hotsko: And if it happens, then you’d rather have a plan already in. And to kind of wrap things up today, the last thing I want to chat with you about is, it’s an important topic heading into tax season here. So as we’re thinking about this new season, what are some things that investors should be thinking about or review in their portfolio where investment strategy is, we’re in this new year.

[00:39:07] Mark Boyer: So year end we’re doing a lot of this right now, especially again in, you know, some of the areas of like fixed income, which has gotten hit this year. Even if you’ve had fixed income for a while, you know, we’re still at some lows. So one thing you can be doing in here is tax loss harvesting. It’s a great time of the year to, if you’ve got losses in.

[00:39:27] Mark Boyer: Taxable type accounts, that means a non-qualified that are, you know, not iris and things like that. It’s a good opportunity to take some losses by selling stocks and or funds or whatever you have that you’re invested in. And you can do that, you know, if you have ETFs or whatever, you can move from one ETF to the, a similar ETF and taking a loss, and at least that’ll help you on your taxes.

[00:39:50] Mark Boyer: So we’re tax losses in here are. A good opportunity to be looking at that and trying to take advantage of that. Other things are retirement plans. Those opportunities, like those 401ks that just had a client, he’s got a business and he’s, we said, well, have you maxed out your retirement this year? And he said, no.

[00:40:06] Mark Boyer: And he said, well man, call your HR department and make sure you get that mag, like Jason mentioned, that free money, get some matching and make sure. Get that, that in before the end of the year. And then another situation where you’re setting up for small companies, you know, steps, things like that. There’s certain types of plans like simples that need to be set up before the end of the year.

[00:40:24] Mark Boyer: So just things like that you know, that you want to look at other things was charitable giving. It’s a great time for tax writeoffs. This is a great opportunity for you if you’re so inclined to give some money away to get some, and I don’t know the tax situation in Canada, so I may be off here, but I know in the States you could get write offs.

[00:40:42] Mark Boyer: Giving money away to your church, synagogue, nonprofit, whatever. It’s a good opportunity to do that and highly, and I highly recommend doing that. I think it’s a beautiful thing, especially this time of year, is to be a giver. There’s a lot of joy in that and you make yourself a lot, you know, you look at your portfolio may not be so happy, but sounds crazy, but give some away and you’re going to feel a lot better because it feels good to be a giver. So those are things you can do. Some ideas that I would recommend late in the year. . 

[00:41:10] Rebecca Hotsko: Yeah. Just on that point, if someone is in a higher income bracket and they’re really looking for some write-offs to reduce their taxes beyond I guess the losses, is there anything else that they can do, or it’s charitable giving would be one thing.

[00:41:26] Rebecca Hotsko: Is there anything else that you could give them for tips that they could reduce their taxes? 

[00:41:30] Jason Jacobi: Yeah. It depends on their tax situation with, unless, for example, if they have their own companies, right? Step IRA is a great way to, to, again, lower that potential tax burden, tax liability that you have.

[00:41:43] Jason Jacobi: You don’t have to contribute it to it by year end, at least you’re in the states, again, not familiar with your tax laws, but you can, you have up until tax data to stash away a sign. Chunk of a net operating income that might be sitting around, that’s going to flow through to your individual tax return that you might not want.

[00:41:59] Jason Jacobi: So that’s a good way to do it. There’s again, retirement vehicles are a great way to potentially lessen your tax burden. Charitable giving 501 donor advised funds. Giving to those type of things where you can get an immediate tax write off where you don’t even have to know exactly what you’re passionate about.

[00:42:16] Jason Jacobi: Maybe there’s an investor out there that’s like, man, I made a ton of money. I’m going to have a lot of taxes this year. I don’t, you know, year ends coming up. I don’t have like a specific cause that I’m passionate about. Donor advised funds are a great way to get an immediate tax deduction. It goes in and it actually can be invested.

[00:42:33] Jason Jacobi: As well. And so you can actually have capital appreciation within that as well. So you’re actually, let’s say you give 10,000 bucks, you know, by the time you actually give it to something you’re passionate about, might be 14, 15,000. So it actually is the gift that kind of keeps on giving per se, and there’s a ways to do that.

[00:42:49] Jason Jacobi: It’s a great way to, to figure the, lessen your tax burden as well. 

[00:42:53] Rebecca Hotsko: Wow. Yeah, that’s a really interesting strategy. I haven’t heard of that before. I’ll have to check if that’s something can do in Canada as well. But for investors, interested to learn more about you guys and the work that you do, where can they connect with you and learn more about everything that you guys do?

[00:43:12] Jason Jacobi: Yeah, they can they can visit our website, boyerfs.com got some great kind of, we call it the war room. We got some great blogs that we write on, whether it’s a year end checklist like that. We talked about some great kind of, we do what we call the Boyer brief, which is our version of like, kind of like a monthly synopsis of big topics, YouTube videos, things of that nature that are pretty interactive.

[00:43:35] Jason Jacobi: So that’s probably the hub of where things live. Our YouTube page, again, @boyerfs, Boyer Financial Services, and those are the main two places. Facebook Boyer Financial Services, and even LinkedIn as well. We put all of our content on all of our social channels, so it’s very easy to access. 

[00:43:50] Rebecca Hotsko: Well, thank you so much for taking the time to join me today.

[00:43:54] Jason Jacobi: Thanks. It was a great chatting with you, Rebecca. 

[00:43:57] Mark Boyer: Great to be with you. 

[00:43:57] Jason Jacobi: Thanks for having us . 

[00:43:59] Rebecca Hotsko: All right. I hope you enjoyed today’s episode. Make sure to follow the show on your favorite podcast app so that you never miss a new episode. And if you’ve been enjoying the podcast, I would really appreciate it if you left a rating or review.

[00:44:15] Rebecca Hotsko: This really helps support us and is the best way to help new people discover the show. And if you haven’t already, make sure to sign up for our free newsletter. We Study Markets which goes out daily and we’ll help you understand what’s going on in the markets in just a few minutes. So with that all said, I will see you again next time.

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