Episode 201: Avoiding Portfolio Pitfalls
by SGL Financial
Our 2 Cents – Episode #201
Avoiding Portfolio Pitfalls
We are back with another fantastic episode of Our 2 Cents! Today, Steve and Gabriel discuss the latest in cancer testing and take a look at what’s happening with home and car sales. We’re also kicking off a two-part series exploring common money mistakes. Listen in now using a link below!
- Quotes of the Month:
- “Money doesn’t change you. It reveals who you are when you no longer have to be nice.” – Tim Ferriss
- “Success seems to be connected to action. Successful people keep moving. They make mistakes, but they don’t quit.” – Conrad Hilton
- Gabriel’s ‘Quick Hits’:
- Explore the potential of a new cancer-screening blood test, examining its pros, cons, and price to determine its value.
- Learn how soaring interest rates are contributing to a slowdown in home and car sales.
- 5 Mistake Special (Part 1):
- Discover 5 key mistakes to avoid in your investment portfolio and tips for improvement.
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Podcast Transcript
Announcer: You are listening to Our 2 Cents with the team from SGL Financial, building wealth for life. Steve Lewit is the President of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest and financial news, trends, strategies, and more.
Gabriel Lewit: Well, hello, everybody, and happy day to you. Whatever day it is, happy day.
Steve Lewit: Happy sunny day.
Gabriel Lewit: Happy day. Yes, today is sunny. Hopefully, it’ll be sunny the day you’re listening, as opposed to cloudy and gray. And speaking of sunny, Steve and I were recently, a one-day work trip in and out, Sunday to Monday, in Naples, Florida. And it was indeed sunny and 70 degrees, and it was a glorious one-day escape from the weather here in Illinois.
Steve Lewit: Naples is such an interesting place, isn’t it, Gabriel?
Gabriel Lewit: Yeah, a lot of nice palm trees. It was nice sunny weather. We weren’t there long enough to really experience much, but we had a little mini work conference, came back home, we-
Steve Lewit: How many Bentleys, and Lamborghinis, and…
Gabriel Lewit: … saw a lot of nice cars.
Steve Lewit: Oh my gosh.
Gabriel Lewit: It’s like-
Steve Lewit: We have a rich people car lot down there.
Gabriel Lewit: Yeah. We drove past the ocean, briefly, just to see what it looked like.
Steve Lewit: It was beautiful, huh?
Gabriel Lewit: It looked pretty.
Steve Lewit: Yeah.
Gabriel Lewit: But then we drove back to the airport.
Steve Lewit: Yeah. Well, it was a good trip though.
Gabriel Lewit: It was. Yeah. So today, of course, is the first episode after our 200th episode. And we had quite a few people just sent us some quick congrats emails, congratulation emails. Thank you for those.
Steve Lewit: Thank you. Absolutely.
Gabriel Lewit: It means a lot to us. And we’re excited to continue onwards and upwards with our 201th episode here today.
Steve Lewit: And we’ll start the day by this new episode, by telling everybody that I learned that there is a new drink called, what, Poppi?
Gabriel Lewit: Poppi.
Steve Lewit: Poppy.
Gabriel Lewit: Yeah. So we’re going to order some Poppis for the office. And no, this isn’t from the Trolls movie.
Steve Lewit: Yeah, I heard Poppis, and I said, no, we’re starting to what?
Gabriel Lewit: Well, Poppy is, she’s the main character in the Trolls movie, I think, right? Yeah. So that’s what I think of when I hear Poppy. But no, these are sodas. They’re healthy, gut-friendly, probiotic filled, low-cal, whatever sodas. And I saw a commercial or something for them, I said, “You know, we need some of those at the office. So if you’re in for your next meeting, soon you can request a Poppi of your choosing and we will have those here for you.
Steve Lewit: Are we going to have mommy sodas?
Gabriel Lewit: I don’t have those.
Steve Lewit: So, we have Poppy and Mommy?
Gabriel Lewit: This is P-O-P-P-I, okay?
Steve Lewit: Oh, P-O, Poppi.
Gabriel Lewit: Yeah. Yes. No mommy soda, Poppi soda.
Steve Lewit: All right.
Gabriel Lewit: All right. Well, to kick things off today, we do have a great show lined up for you. And we’re going to talk, because the month is almost over and we missed our quotes of the month, we’re going to do some late month quotes of the month. And I wanted to get your thoughts on this one, Mr. Lew.
Steve Lewit: Yes, sir.
Gabriel Lewit: See what you think it means, because I wasn’t quite sure. Money doesn’t change you, it reveals who you are when you no longer have to be nice.
Steve Lewit: Oh yeah, I like that. Well, look, a lot of people get money by being nice to other people. You get a job, you got to be nice to your boss. I think money gives a sense of power. And some people say, well, I have all the money I need so I can act the way I want to act. People need my money so I can act any way that I want, because I’m in power, because I have more money than you do.
Which is actually, many people that don’t have a lot of money try to gain power by not being nice. And the fact is that there are many rich people that I know that are really nice and money doesn’t affect them.
Gabriel Lewit: So, you’re saying that if you’re nice, you’re nice, and if you’re not nice, you’re not nice?
Steve Lewit: I pretty much feel that way. I think if you have-
Gabriel Lewit: So, you don’t think money changes people?
Steve Lewit: Money can change people, yeah, but I think it’s an infatuation with power. I think people equate money with power. If I have money, I can determine, I can get rid of you, and I can buy that guy, and I can sell this, and I can buy that. And I’m in charge and you can’t tell me what to do. Which is entirely not true, but that’s the way they feel. That’s not real power. That’s actually dependency on others to feel better about yourself, which is not power, by the way.
Gabriel Lewit: Very deep.
Steve Lewit: Deep.
Gabriel Lewit: Yes.
Steve Lewit: Deep down in the philosophical framework of life.
Gabriel Lewit: Well, there you go folks. That’s your first quote of the month here for January. And the next quote is by-
Steve Lewit: Wait, what are your thoughts on that quote?
Gabriel Lewit: I still don’t understand it. I don’t know the line, it reveals who you are when you no longer have to be nice. I’m not sure what that part’s referencing.
Steve Lewit: So, think of it this way, let me help you here. Everybody has a facade. We wear this facade.
Gabriel Lewit: Well, when do you no longer have to be nice, is the question?
Steve Lewit: When you don’t have to wear your facade and you’re not a nice person. In other words, you’re not acting nice. A lot of people act nice when they really don’t feel nice inside. They’ll be polite and patient to other people, but inside they’re saying, what a pain in the neck that person is. Or I really don’t like that person.
Gabriel Lewit: So, if you had lots of money, it’s saying you don’t have to be nice. But if you’re not nice, it reveals who you truly are though.
Steve Lewit: That’s right, you drop the facade and the true you comes out.
Gabriel Lewit: Okay, I think I’m catching this here.
Steve Lewit: We can work with this over the weeks coming. Yes.
Gabriel Lewit: All right. Well yes, the next one here is by Conrad Hilton, and I believe that is the guy that does the Hilton Hotels-
Steve Lewit: Hotels.
Gabriel Lewit: Is that him?
Steve Lewit: Yeah, that’s who it is.
Gabriel Lewit: Maybe. Our TV is not working me in our podcast room-
Steve Lewit: No may-
Gabriel Lewit: So, we can’t look it up.
Steve Lewit: You see, I said, “That’s who it is,” and you said, “Well, maybe.”
Gabriel Lewit: I believe you.
Steve Lewit: No, you don’t.
Gabriel Lewit: I just want to verify. We’re getting thumbs up from…
Steve Lewit: That is not a maybe, folks. That’s an absolutely.
Gabriel Lewit: So yes, your Hilton Hotel Conrad here says, “Success seems to be connected to action. Successful people keep moving. They make mistakes, but they don’t quit.”
Steve Lewit: Yeah. Oh, you know about that.
Gabriel Lewit: Yeah. I like that, Mr. Conrad. And his hotels were, and are, of course, successful. And yeah, you got to keep moving. If something doesn’t work, try again. If your business venture that you try fails, try a new one. Don’t give up. Go after what you want, take action, and you’re going to have a better chance of getting there.
Steve Lewit: Well, I think a lot of people look at successful companies and they say, “Wow, I wish I could do that.” But the story behind the success story are a number of failures in all of these companies. It’s a matter… Look, I’m an entrepreneur and I’ve had business failures. But if you don’t go-
Gabriel Lewit: Before this business.
Steve Lewit: Before this one, yeah.
Gabriel Lewit: Let’s just clarify that.
Steve Lewit: This is my… But all of those-
Gabriel Lewit: Before you found me.
Steve Lewit: Before… You are a business success.
Gabriel Lewit: I’m just teasing. I’m just joking.
Steve Lewit: Yeah, but all those failures are grist for the mill, if you will. They serve to, when you get the right opportunity, all of that is a knowledge base that you bring into the opportunity, and that’s how you reach success. But if you don’t go through the failure, it’s not likely you’re going to reach success.
Gabriel Lewit: Yeah. Sometimes you do learn from your mistakes, right?
Steve Lewit: Well actually, you don’t learn… Now, you’re not going to like this, because you don’t learn from your mistakes, you learn from doing it right. Your mistakes show you what a mistake is.
Gabriel Lewit: Oh, okay.
Steve Lewit: Okay.
Gabriel Lewit: Tomato, tomato, but sure.
Steve Lewit: No, this is philosophically deep.
Gabriel Lewit: Philosophical tomato. Okay.
Steve Lewit: Tomato, tomato.
Gabriel Lewit: All right, well those are our quotes for the month, hopefully-
Steve Lewit: I want to-
Gabriel Lewit: Hopefully, you feel more spiritual, deep, whatever you gained out of those. I gained something there, but yeah.
Steve Lewit: We’ll work on that too.
Gabriel Lewit: All right, so I thought this was interesting. Okay? I got a couple little tidbits for you here, and then we’re going to get to our main two topics of today’s show. But this is something I saw that really piqued my interest. It was an article about a blood test that screens for 50 different types of cancer.
Steve Lewit: I heard about that, but I know nothing about it.
Gabriel Lewit: And it comes with, okay here, a $949 price tag. All right, so here’s the lead-in in the article. It says, “If you could take a simple blood test that could detect multiple types of cancer while they’re still in an early and treatable stage, would you?” And for many, the answer would be a resounding yes. Okay. And so, basically there are tests now that you can purchase. So there is… Where is it here? Hold on… Something called the Galleri test from a company named Grail.
Steve Lewit: Is it the Holy Grail, or?
Gabriel Lewit: I guess so, right? Yeah, so basically the idea here is that you would spend $949, and basically, it will then submit it through their system somehow, and will screen for all sorts of different tests with DNA assessments and all sorts of other things, with nearly an 88% accuracy.
And according to the company, 99% of the people do screen negative for cancer. But for about 1% of those ages 50 to 79, test results will show a cancer signal was detected along with the organ or tissue type associated with it, and then you can go on to get a more official diagnosis. So essentially, it gives you the ability to essentially confirm that you are hopefully cancer-free or detect something earlier than otherwise and be able to take early preventative or corrective action. All right?
Steve Lewit: So, we don’t know. Well, that sounds like fantastic, doesn’t it?
Gabriel Lewit: Uh-huh. Yeah.
Steve Lewit: I mean, if I could take a test for a thousand bucks and would tell me that I have something that other people can’t see and hasn’t really developed to the point where I’m disabled by it, or I see a lump or something like that, colon cancer, it’s a huge deal. Why wouldn’t I spend a thousand bucks? So what is the negative on this?
Gabriel Lewit: Well, the negative, it’s a thousand dollars and many people can’t afford that. The other negatives would be, it’s not a hundred percent accurate. It could have false negatives and maybe false positives, although that’s unlikely from what they say. Okay?
But ultimately, it doesn’t mean you have to stop seeing your doctors, but it’s just another tool that one could employ. And of course, why are we bringing this up? Well, we have a focus not just on your money, but on your health and wellbeing. We also often talk about should you spend more of your money? Well, what better way to spend some of your money in retirement than on ensuring you are healthy and able to not worry about the health side of things?
Because cancer is one of those things where you never know, do I have it? You get a weird bump on your somewhere and you’re like, “Oh my gosh, it’s cancer.” Right? But here you could go in, and you could test for that, and maybe put your mind at ease. Right?
Steve Lewit: Yeah. So this is actually a prescription that people have to get. You just can’t buy the test off the shelf.
Gabriel Lewit: Where did you see that?
Steve Lewit: I see that under the last page. And it says the Galleri test, which is available by prescription.
Gabriel Lewit: Oh, I was seeing that it wasn’t covered by insurance, but it sounds like you still need to get a prescription-
Steve Lewit: Right, prescription.
Gabriel Lewit: … either way for that. Yes, yes, yes.
Steve Lewit: So, your doctor has to say, “Yes, amen. You need this.”
Gabriel Lewit: So yeah, I just thought it was interesting. I hadn’t heard of it before. If I come across something I think maybe you as our listener hasn’t heard of before and might find intriguing, I wanted to bring it up here on the show.
Steve Lewit: Well, especially, some diseases are so prevalent, like cancer, and so onerous, that anything that could help with that, I would certainly agree we need to bring to our client’s attention.
Gabriel Lewit: Yes, indeed. All right, so-
Steve Lewit: Good job.
Gabriel Lewit: Yeah, Google that if you’re interested, or if you want the article, let us know here at info@sglfinancial.com. We can send you some of the details there on that for your perusal.
Steve Lewit: Just so that you know, folks, the name is Galleri, G-A-L-L-E-R-I, G-A-L-L-E-R-I test
Gabriel Lewit: And I have not taken this test yet-
Steve Lewit: No.
Gabriel Lewit: … to independently verify for you.
Steve Lewit: You know, I’m thinking, maybe go and take it.
Gabriel Lewit: Yeah.
Steve Lewit: Yeah, why not?
Gabriel Lewit: Maybe you should.
Steve Lewit: Maybe I should.
Gabriel Lewit: All right, just another little tidbit here. This is about US home sales. Okay, US just experienced its slowest annual sales of homes since 1995. And of course, when I first saw 1995, I’m like, “Oh, that wasn’t that long ago.” And then I realized that was 30 years ago. I’m like, whoo.
Steve Lewit: Isn’t that incredible?
Gabriel Lewit: Wow. Yeah.
Steve Lewit: It’s like yesterday.
Gabriel Lewit: That was my first reaction. “1995? Oh wow, that’s not that… Oh, yeah.”
Steve Lewit: That’s not that long.
Gabriel Lewit: 30 years. Okay. Anywhos, I digress. But yes, okay, the existing home sales last year totaled 4.06 million, the lowest on an annual basis since 1995, according to the National Association of Realtors. Obviously, elevated mortgage rates, which are still elevated is part of it. High home prices are still a part of that. Some mortgage rates are still between six and a half, 7%. And some are concerned that these are going to be the new normal for a while for mortgage rates, because interest rates are not dropping nearly as quickly as people had projected that they might.
Steve Lewit: Yeah. By the way, the Fed announces today new, if they’re going to change the interest rates, folks. And we’ll bring you up to speed on that on our next podcast.
Gabriel Lewit: Yep. And so, just something to keep in mind, if you’re thinking about purchasing, it is still pricey. The median home price has risen almost 50% over the last five years.
Steve Lewit: Over 400,000 bucks. Extraordinary.
Gabriel Lewit: Yeah, so this is all combining to make homes less affordable. Therefore, there is a lot less action in the home marketplace. There is some new supply on its way. Some estimated 1.63 million housing units were completed in 2024, which is a pretty sizable increase.
Steve Lewit: Which is very good. The problem is that a lot of people are sitting on mortgages at two and three, or one or four, very low interest rates, and they don’t want to give up that mortgage to buy a new house. Because you’re paying seven against three, it’s more than double the rates. It’s very expensive. So that compounds the problem, is that people are locked into the real estate that they want.
Now it’s interesting, Gabriel, that the wealthy market is more robust. Wealthy houses are still exchanging pretty quickly.
Gabriel Lewit: Well, that’s because wealthy people have-
Steve Lewit: Are more wealthy.
Gabriel Lewit: … more money to spend. No surprise there.
Steve Lewit: Well, they’re not worried about three to 4%, even though it’s bad. It’s not good for them, it’s not like a break the deal kind of thing.
Gabriel Lewit: Yeah, correct. All right, so hopefully that brings you the news to use here for today’s show. With that in mind, let’s talk about our main topic.
Steve Lewit: Can I add one thing here?
Gabriel Lewit: Yeah, of course.
Steve Lewit: Because this caught my eyes, that if you haven’t been shopping for a car for a while, brace yourself. And this article is just saying how the car prices in America, the $35,000 car price, which was very, very popular, is really going away. And most of the cars are trending to upper forties, fifty-thousand dollars, even more expensive. So I just wanted to mention that, because these trends kind of take over. And I’ve had so many clients in the past, I don’t know, month, that are buying new cars, and saying, “Steve, I’m paying 50 grand for a car. I can’t get a really nice car cheaper than that.”
Gabriel Lewit: Yeah, they are expensive, and they’ve gone up way more than the average rate of inflation has. And it’s seemingly, again, here for good. At first it was, “Hey, supply chain’s high.” And maybe that was a convenient excuse, maybe it was real. But either way, it’s resulted in, I think, higher prices here to stay. And unfortunately, it doesn’t seem to be abating in the near future.
Steve Lewit: No, it doesn’t. And the car companies actually make more on higher priced cars, so they’re kind of trending that way. They’re adding a lot of ancillary things, like heads-up displays and electric everything, which we didn’t know we needed. But now when people see that they add that to the car driving the price up.
Gabriel Lewit: Yep, yep.
Steve Lewit: Can use your phone, you don’t need a navigation system for 4,500 bucks.
Gabriel Lewit: Yep, exactly.
Steve Lewit: You’re not getting very excited about this.
Gabriel Lewit: Well yeah, it’s not much… Yeah, it’s a good little tidbit there.
Steve Lewit: Yeah, well, this is as good as your tidbit.
Gabriel Lewit: Sure, of course.
Steve Lewit: Sure.
Gabriel Lewit: That’s all, I just wanted to make sure we-
Steve Lewit: Should have a tidbit rating contest with our clients.
Gabriel Lewit: There you go.
Steve Lewit: See whose tidbit everybody likes better.
Gabriel Lewit: We could, yes.
Steve Lewit: We could.
Gabriel Lewit: Yep.
Steve Lewit: Yeah.
Gabriel Lewit: All right, anything else-
Steve Lewit: No, I’m done.
Gabriel Lewit: … on your end, Mr. Lew?
Steve Lewit: I’m done. I know you want to move on to your topic, so I’m done.
Gabriel Lewit: No problem. I will work conveniently around anything you want to talk about.
Steve Lewit: My insertion.
Gabriel Lewit: All right, well yeah, so this today was going to be a five mistake special, as I have come to call this here for our show, because I’ve got two different articles that are both focused, or two different topics, I should say, inspired by articles, that are focused on five mistakes to avoid, or five mistakes that people often make. Okay?
So the first one is five mistakes to avoid with your investment portfolio in 2025. All right? And Mr. Lew here seems to be jumping around with his articles.
Steve Lewit: My papers in front of me got mixed up.
Gabriel Lewit: All right. You’re ready? You’re okay over there?
Steve Lewit: I’m not only ready to go, Gabriel, I am raring to go.
Gabriel Lewit: All right. Okay, so portfolio construction, of course, is not a static set and forget approach, although some people do it that way. There are things that are both good decisions, and things that may be poor decisions. And our job today is to try to help you avoid making poor decisions in your portfolio construction.
Steve Lewit: Yes.
Gabriel Lewit: All right? So the first thing here is, although we talk a lot about it, don’t rush to invest your extra cash back into the stock market. Why do I say that? Well, the market had a very good year in 2024. The market had a very good year in 2023. Many people feel like they’re missing out. We talk about this on the show, FOMO, fear of missing out. And as a result, if you had been sitting on the sidelines, you might think, okay, well I really don’t want to lose out anymore. I’m going to get in.
Steve Lewit: Yeah, and I have this cash to do it.
Gabriel Lewit: And I have this cash to do it. And in theory, that sounds great if the market’s going to keep going up. But oftentimes what people do, and there’s a lot of data on this, is you could get in just in time to see the market go the other way. And ultimately, I would say, making decisions with what to do with your cash should be something that’s done more in context of your overall financial plan, as opposed to chasing market trends.
Steve Lewit: Yeah, it’s like, do you need more money in the market? Do you need this cash in two years, or one year, in six months, or never? What are your goals with the money? What service? Why are you putting it in the market?
Gabriel Lewit: Yeah. Do you want to give your cash to Steve?
Steve Lewit: Or Gabriel? Either way, we’re open.
Gabriel Lewit: Just teasing. Yeah, so ultimately, that’s one thing to keep in mind. Now if you haven’t been on our show in recent episodes, in last year we talked a lot about, if you are going to keep your money in cash, put it in something, or a cash equivalent, put it in something that’s going to you a higher rate without the risk of interest rates dropping down.
So you can get fixed rate investments, for example, that give you that higher rate, that are still generally very liquid or accessible. But if interest rates do start to trend down this year, you’re not going to get less and less on your money. That’s still, I think, a really easy upgrade opportunity with your cash. But be cautious about throwing it into stocks, because the market valuation is still considered very, very high right now.
Steve Lewit: Yeah, never chase a winner, as they say. Chasing a winner usually turns into a loser. You don’t want get all excited about it, I’m going to follow the herd. That’s called the herding effect. You’ve probably heard of that, where you just follow what everybody else is doing.
Gabriel Lewit: I’ve heard. I’ve heard effect.
Steve Lewit: The herding effect.
Gabriel Lewit: Yes, I have.
Steve Lewit: I knew you’d pick up on that.
Gabriel Lewit: There you go. All right, so number two, what mistake to avoid here is not globalizing your portfolio with some form of an international stock position.
Steve Lewit: Big mistake.
Gabriel Lewit: Okay? And why do people make this mistake? Well, no surprise, if you’ve been following international versus US, international has lagged for quite a while, compared to Us. But the longer something lags, and the better something else does, in other words, US has done really, really great, international has done not so great. The forward-looking outlook on that continues to shift more and more in favor of US having a pullback and international seeing a pull ahead.
And that’s the idea, right? We don’t know exactly when that will occur. We don’t know exactly the timing of that, but you can diversify and make sure, if the fundamental valuations on internationals make them an attractive buy over the next 10 years, you can have that exposure in your portfolio. And that’s exactly what research from Vanguard and other similar research firms have suggested, is that US is going to see a more troubling or challenging next 10 years, and internationals is going to see a much more optimistic or rosy outlook for the next 10 years.
Steve Lewit: Yeah, and we started to see a little bit of that two years ago, Gabriel, and then a pullback. And the US is kind of on a roll right now. And it’s like we were talking about earlier, it’s easy to say, “Well, I want all my money in US. Look at the growth of the S&P, look at the growth of the NASDAQ, and the Dow.” It’s like, why should I… Overseas is full of problems. Yet you have these major economies overseas, like India, and China, and Russia. I mean, these are, the whole European conglomerate is very productive. And at some point it will shift. We just don’t know when that is.
Gabriel Lewit: Yeah, exactly, right? So don’t completely ditch international, and don’t make that mistake just because US has outperformed in the last year or two.
And that is something that’s hard to really understand. You’ve got to be a believer in diversification. You’ve got to have that as a core part of your investment philosophy, that you’re not going to chase trends, you’re not going to chase after yesterday’s winner and hope that their tomorrow’s winner. You’ve got to really believe in that to do it. And some people struggle with that. They just can’t get their brains wrapped around not chasing after the hot thing or the hot ticket. And there are ramifications for that. Ultimately, longer term being the key word there, you could lose out quite a bit.
Steve Lewit: Absolutely.
Gabriel Lewit: Yeah.
Steve Lewit: Could you do me a favor?
Gabriel Lewit: Sure.
Steve Lewit: Could you pronounce the word winna’ the right way, and not winner? That’s so formal. Winna’.
Gabriel Lewit: The what?
Steve Lewit: Winna’, you know, don’t chase the winna’.
Gabriel Lewit: Chase the winner.
Steve Lewit: Winna’
Gabriel Lewit: Winner chicken dinner? I mean, what-
Steve Lewit: It’s like you were saying yesterday, “The color is yeller.”
Gabriel Lewit: That was a joke. It’s yellow.
Steve Lewit: You have to explain that to people.
Gabriel Lewit: Yeah. No, any who’s.
Steve Lewit: Explain it.
Gabriel Lewit: The yeller?
Steve Lewit: The yeller.
Gabriel Lewit: Well yeah, there was a movie where, I think it was National Lampoon’s Vegas Vacation, where, Chevy Chase? Was that his name? I think so. Yeah, he’s at a buffet with his brother and his brother kind of plays this, I don’t know, just kind of a doofus kind of guy. He’s at this buffet, which is like a $4 buffet or free, I don’t know, it’s not very high quality food. And he’s looking at, there’s food there and it doesn’t say what it is. It’s just one’s blue and one’s yellow. And he is like, “Uh, let me give me some of that yeller.”
Steve Lewit: That yeller. Where this came up is we were discussing, we’ve renovated our whole office here, folks. Hope you come by and see. It’s quite nice, I think. And we were talking about colors, and someone said yellow, and Gabriel chimes in, “No, that’s really yeller.”
Gabriel Lewit: I don’t even remember what that was about.
Steve Lewit: Yeah.
Gabriel Lewit: Anyways, getting back on track here. We’ll move on to the third mistake.
Steve Lewit: To the winna’s and losers.
Gabriel Lewit: Yeah. The investors not de-risking their portfolios as they near retirement. Okay, that can be a big money mistake. Why? Okay, we get it, US large cap’s doing great, did great last year. Again, did great in 2023. Riding high, feeling good, nothing could ever bad happen, right?
Steve Lewit: Nothing ever.
Gabriel Lewit: You just stay full steam ahead in a hundred percent equity models and you’re going to make another 25% this year. Right?
Steve Lewit: Plane takes off, it never lands.
Gabriel Lewit: Say that again?
Steve Lewit: The plane takes off but never lands.
Gabriel Lewit: Yeah. Yeah, usually, what goes up comes down at some point.
Steve Lewit: Yeah.
Gabriel Lewit: Like a plane. Okay. So the idea here is, the mistake, of course, is thinking that what goes up will just stay up forever. You should de-risk certain parts of your portfolio, either to a target portfolio, or using a bucket plan, or for solving for your future income in a way that will ensure that you don’t lose a big chunk of money in the next bear market that will occur at some point.
Steve Lewit: It’s asking the question that you and I always ask when we’re meeting with clients, is look, are you willing to lose 5%, 10%, 15%, 20%, 30%? You have a million dollars. Are you willing to lose 30% in any one year, if that million is now 700,000? And if the answer to that is no, well then you can’t have a portfolio that is designed to give you, let’s say, eight to 10% a year, because in any one year you could lose 30 to 40%.
Gabriel Lewit: Yeah. I had a client just the other day, came in, new client, and his wife’s risk tolerance was no more than five to 10%, based on our discussions together. And their whole portfolio was all stock. And he understood it was risky. And he said, “Well, it’s been doing good and I think it’s time for us to take some of our chips off the table.”
Steve Lewit: Yeah, and de-risk.
Gabriel Lewit: And he understood that, and he felt good about that. And that’s the other way to look at a long bull market is, you’ve already won. How long do you want to push that luck as opposed to taking some of your winnings and making sure you’ve got that safety element in place?
Steve Lewit: Yeah. And the other way of looking at it is to say, “How much do I really need to make to earn on my investments? Why am I in the market trying to hit a grand slam when I can be in other places hitting singles and doubles, and that’s more than enough growth than I need, and I can sleep well at night?”
Gabriel Lewit: Yeah, exactly. And sometimes singles and doubles wins the baseball game.
Steve Lewit: Game wins the game. Definitely.
Gabriel Lewit: Okay. The next mistake is trying to predict interest rates very specifically. And as you can see, last year we talked about the predictions on interest rates coming down, and they have come down slower.
Steve Lewit: Much slower. Yep.
Gabriel Lewit: So, like everything, we can have some ideas, and some thoughts, and some opinions. But try not to make too many really hard and fast predictions, and build your plan around those, because those predictions may or may not come to pass. I have people making predictions of other kinds. So maybe the rule is don’t try to make hard and fast predictions. But people will say, “Oh, the market’s going to go up this year.” I’m like, okay, and you know that how?
Steve Lewit: Well, I’m a believer.
Gabriel Lewit: Yeah.
Steve Lewit: I feel it in my gut.
Gabriel Lewit: Just like people say, “Oh, market’s going to go down this year.” I say-
Steve Lewit: They feel that in their gut too.
Gabriel Lewit: … and you know that how? And both feel it in their guts, and one of them is going to be right and the other is going to be wrong.
Steve Lewit: Well, the whole definition of the word prediction is prediction. It’s maybe, it’s a fortune-telling.
Gabriel Lewit: Yeah. And last but not least, here’s, just to overly confuse everything here, don’t get too conservative. Some people worry about inflation. One of the best ways to overcome inflation is to long-term invest more in stocks. Right? Because the bonds and cash, these things can struggle to beat inflation on what’s called an inflation-adjusted returns basis.
And so here we are telling you don’t get too aggressive in stocks, but we’re also telling you don’t get too conservative Mr. Lewit, how does one balance all of that out? And I know the answer to this, and we repeat it often. What’s the solution to that?
Steve Lewit: Well, is it diversification?
Gabriel Lewit: No. Part-
Steve Lewit: No?
Gabriel Lewit: Well, it could maybe be part of it.
Steve Lewit: Maybe I’m not sure where you’re going?
Gabriel Lewit: It’s have a plan there.
Steve Lewit: Oh, have a-
Gabriel Lewit: Oh, we do that.
Steve Lewit: Yes, yes.
Gabriel Lewit: We do that.
Steve Lewit: So, I had a client. I got on track in my mind, off track. So I had a client yesterday, and she says, “Well, we have a lot of cash.” So I said, “Well, I hope it’s in money market.” She says, “No, it’s in my safety deposit box.”
Gabriel Lewit: Well, that’s not going to keep up with inflation.
Steve Lewit: I said, you know, you’re losing money every day. She says, “Oh no, that cash is still there. It’s the same it was 10 years ago.” And I said, “Well, if you took it out to try and buy something, you think you could buy as much as 10 years ago?” I’m not sure she got it.
Gabriel Lewit: Yeah, well…
Steve Lewit: She just loves having her money in the bank-
Gabriel Lewit: It is, in some ways-
Steve Lewit: … in a safety deposit box.
Gabriel Lewit: … safe in a safe deposit box.
Steve Lewit: It is safe.
Gabriel Lewit: Yes.
Steve Lewit: Well, by definition, safe.
Gabriel Lewit: Well, in the essence of time here, I don’t think we’re going to get to our five-mistake special part two.
Steve Lewit: Yeah, let’s continue.
Gabriel Lewit: So, we’re going to have to continue this next time. Okay? Because the topic, which we’re going to cover next time, in case you’re interested, is five money draining mistakes travelers make when planning a vacation. So stay tuned for that.
Steve Lewit: That’s a good one.
Gabriel Lewit: We’ll have to circle back and talk about those. In the meantime, if you have questions of any kind, big or small, give us a call here, (847) 499-3330. Or go to sglfinancial.com, click contact us, or you can always email us info@sglfinancial.com.
Otherwise, we hope you have a wonderful rest of your week and we will talk to you on the next show.
Steve Lewit: Stay well, everybody. Enjoy.
Gabriel Lewit: Bye guys.
Steve Lewit: Bye.
Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330, or visit us on the web at sglfinancial.com. And be sure to subscribe to join us on next week’s episode.
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