Financial Stocking Stuffers
by SGL Financial
Our 2 Cents – Episode #196
Financial Stocking Stuffers
Welcome back to Our 2 Cents with Steve and Gabriel Lewit! On today’s episode, the hosts share valuable financial insights tailored for the holiday season, which they refer to as “financial stocking stuffers.” Next, they discuss key updates on the S&P 500 and Google’s advancements in quantum computing. Finally, they examine the importance of time horizons and strategies for balancing risk in your financial portfolio. Listen in now using a link below!
- What’s in Your Financial Stocking?:
- Uncover helpful financial tips that could be the perfect addition to your “financial stocking,” helping you take meaningful steps toward a secure and confident retirement.
- Gabriel’s ‘Quick Hits’:
- Discover what the 2025 S&P projection could mean for your financial plans and learn about the potential impact of Google’s quantum chip.
- Investing for a Defined Timeline:
- Explore investment strategies across various time horizons to uncover financial solutions through risk-based opportunities.
Request Your Free Consultation Today
847.499.3330
Podcast Transcript
Announcer: You’re 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 in financial news, trends, strategies, and more.
Gabriel Lewit: Welcome back to Our 2 Cents. You’ve got Gabriel Lewit here, and Steven Lewit here live on the microphone, bringing to you a, well, I’m going to say a holiday cheer-filled podcast today.
Steve Lewit: Well, okay. Well the holiday is right around the corner.
Gabriel Lewit: It is, so I thought I would start some holiday cheer here with our podcast today. I think-
Steve Lewit: I thought we were going to drink through the podcast.
Gabriel Lewit: Well, that would be cheerful, but I don’t think it would be interesting for our listeners.
Steve Lewit: No, wouldn’t it at all, it might be fun though.
Gabriel Lewit: But yeah, I think this show, our next show or two before the holidays, we’re going to mix in and match in some little holiday this’s and that’s.
Steve Lewit: Did you do your holiday shopping yet?
Gabriel Lewit: Well, lucky for me, my wife does almost all the holiday shopping. I almost miss… There’s little like meme videos that go around about this too, about husbands are as surprised on Christmas of what their kids got than as the kids are.
Steve Lewit: Yeah, I’m the same way. It’s like, what did we get them?
Gabriel Lewit: Yes, and interestingly enough, I think it was recently on the podcast, I was talking about how my son, I think it was the podcast, hadn’t learned about Santa yet. And then just two days ago he looked at me point-blank, eye to eye, and asked me, “Dad, is Santa real?”
Steve Lewit: Oh, the poor baby is losing his innocence.
Gabriel Lewit: And at eight and a half I had to instantly process this. I’m like, he’s looking at me right in the eyes and asking me point-blank, do I keep the charade or do I give the charade up?
Steve Lewit: My little…
Gabriel Lewit: And I opted to tell him the truth.
Steve Lewit: That it was a charade?
Gabriel Lewit: Charade or charade.
Steve Lewit: Charade.
Gabriel Lewit: I like saying charade.
Steve Lewit: Well, it sounds so sophisticated.
Gabriel Lewit: Yes, like a vase. You know?
Steve Lewit: Whoa, little Nathan. It’s a charade.
Gabriel Lewit: No. Well, I didn’t quite say it like that. Yeah, Hunt little guy, we pulled the rug out from under you. But I said, “Christmas is all about the spirit of giving and doing kind things for others.” And oh, as a side note, we took him to Target this weekend to buy some toys for the donation to our Toys for Tots Drive that we have here.
Steve Lewit: Yeah, it’s coming up Friday, isn’t it?
Gabriel Lewit: At SGL Financial. So if you have any last minute desire to stop by this Friday at our office between noon and two, you can drop off a toy as part of our Toys for Tots Drive.
Steve Lewit: And we will have some-
Gabriel Lewit: What’s that?
Steve Lewit: … refreshments here.
Gabriel Lewit: Hold up, Producer Gabby is saying something to me.
Steve Lewit: She’s interrupted us.
Gabriel Lewit: What is it?
Gabriel Lewit: Oh, except for, yeah, you’re getting this podcast Sunday after this Friday’s drive.
Steve Lewit: Yeah. So folks, it was good to see you.
Gabriel Lewit: Yeah, that’s a relevant point.
Steve Lewit: Well, I hope you came by and dropped off some toys for tots.
Gabriel Lewit: That was a relevant point. I’m glad you brought that up, and I’m glad I asked that.
Steve Lewit: But I am happy to point out that we are having a record-breaking year. We’ve now got four, almost five boxes filled.
Gabriel Lewit: Yeah, I think this was our third annual here and it seems to be our best year yet. So yeah, we did a little bit of that and talked to him about the Christmas spirit. And if you don’t celebrate Christmas and you celebrate other holidays or New Year’s or Hanukkah… When’s Hanukkah? Mr. Lewit?
Steve Lewit: I don’t know.
Gabriel Lewit: You don’t know?
Steve Lewit: I don’t know. I should know.
Gabriel Lewit: Yes, you should know.
Steve Lewit: I should know.
Gabriel Lewit: Let’s see.
Steve Lewit: Gabby is going to look it up and help me out here.
Gabriel Lewit: Okay, hold on folks.
Steve Lewit: It’s right around the corner.
Gabriel Lewit: Yeah, you should know this.
Steve Lewit: I should know. Yeah.
Gabriel Lewit: Right?
Steve Lewit: Well, yeah, yeah, I know.
Gabriel Lewit: Yeah, okay.
Steve Lewit: It’s right around the corner.
Gabriel Lewit: December. Evening of Wednesday, December 25th through Thursday, January 2nd.
Steve Lewit: Yeah, it’s a lot of gift-giving every day.
Gabriel Lewit: So, around the same time as Christmas.
Steve Lewit: Yeah, but we take, by the way, if you’re getting this Sunday or when are they getting this? Sunday? Sunday if you want to come in Monday with your toys, we’ll take them.
Gabriel Lewit: Well, no, the donation pickup from the Toys for Tots Marines.
Steve Lewit: When do they come?
Gabriel Lewit: Friday.
Steve Lewit: Oh, they come Friday.
Gabriel Lewit: No, they don’t come Friday? When do they come for?
Gabriel Lewit: Monday?
Steve Lewit: You can still come Monday.
Gabriel Lewit: Oh, you were right.
Steve Lewit: Yeah, because the last time they picked up, they were supposed to come Monday, they didn’t come until Wednesday.
Gabriel Lewit: Oh, all right, well we’re giving you all sorts of crazy information here today, but let’s jump into our show, shall we? All right, so we’re going to start off with, I’m calling this Financial Stocking Stuffers for 2024, okay? And what this is, is it’s a variety of smaller talking points that you could fit into your financial stocking for 2024.
Steve Lewit: Did you think of this yourself?
Gabriel Lewit: No, I Google all sorts of random stuff to come up with ideas for the show.
Steve Lewit: All right, Financial Stocking Stuffers.
Gabriel Lewit: 2024 edition, yes.
Steve Lewit: 2024 edition. Did we have a 2023 edition?
Gabriel Lewit: I don’t think we did, but-
Steve Lewit: I don’t think so.
Gabriel Lewit: … this is 2024’s edition, in case we decide to have a 2025, yeah.
Steve Lewit: A ’25.
Gabriel Lewit: All right, so-
Steve Lewit: So, take us, I’ll follow your lead.
Gabriel Lewit: Yeah, so the first one I wanted to talk about, and I got inspired by this on a recent call I had with a client who was asking, “Gabe, what should I do at the year-end?” And one of the items that we talked about most was if you haven’t rebalanced your portfolio, it’s a good time at the end of the year to take a look at how your portfolio’s done. Now, you could do this if you have your own 401k, if you manage your own money. If you’re a client of ours, we probably have done this for you. Okay? But it reminded me that, yeah, one of the things you should be paying attention to here is rebalancing your portfolio. Now, Mr. Lewit.
Steve Lewit: Yes.
Gabriel Lewit: I’m not sure if we’ve talked about this much in the past. What does rebalancing mean?
Steve Lewit: Okay, so every portfolio has a number of different asset classes. I’ll make this simple. Let’s say you have large caps, small caps, and bonds. Okay? Now, let’s say large caps really go up in value and bonds go down in value, or small caps go down in value. Now your large caps have a different, a much bigger proportion of your portfolio than you planned it to have. So what you got to do if you want to keep your portfolio true to its original purpose, is you need to sell some of the appreciated large caps and buy some of the depreciated bonds, which is selling high and buying low, which is why rebalancing when everything returns to the mean, as you always talk about, you win in that. Why rebalancing is so important.
Gabriel Lewit: Yeah, yeah. So let’s say-
Steve Lewit: By the way, that’s called portfolio drift.
Gabriel Lewit: Yeah. So let’s say you had, I’ll just expand on that, 50,000 in… Well, no, I’ll do 70,000 in US large cap at the start of this year and 30,000 in bonds.
Steve Lewit: Yeah…
Gabriel Lewit: And bonds this year have done say, two to 3%.
Steve Lewit: I would say they did nothing.
Gabriel Lewit: Okay, yeah. Bonds did nothing, so at the end of the year you still have $30,000 in bonds. And let’s say your stocks did 20% US large cap, so your 70,000 would be worth 84,000. You are no longer in a 70/30 model. You have 84,000 of stock and $30,000 of bonds. Your portfolio has, as you said, drifted.
Steve Lewit: Yeah, and you’re in a more risky or riskier, I was going to say more risk. You’re in a riskier portfolio than you want to be without-
Gabriel Lewit: Than you were at the start of the year as well.
Steve Lewit: Yeah, and it could work the other way. Bonds could go up. Now you’re in a more conservative portfolio than you want to be, so you won’t reach your numbers.
Gabriel Lewit: Yeah. So the idea of rebalancing is not one we’re going to spend a ton of time on here, but you essentially sell off what’s done really well that’s now out of weight, and you buy a little bit more of what’s underweight to bring your portfolio back into alignment.
Steve Lewit: Now, if I found that in my stocking stuffer, I would look for another stocking stuffer that has tax loss harvesting in it.
Gabriel Lewit: Yes.
Steve Lewit: Right? Because when I’m selling high, I probably have capital gains, unless this is in an IRA. So is there or are there losses that I can use in my portfolio to offset the capital gains because I’m selling the appreciated positions?
Gabriel Lewit: Perhaps, and you have to have funds or stocks that have lost money and value to do what’s called tax loss harvesting.
I just had a review with a client yesterday. He’s a big… Well, he has a diversified portfolio, but one of his accounts is an individual stock portfolio that he self-manages. But as we are his advisor, we were looking through his positions and there was about 20 that had lost value this year. Dogs, as he would say.
Steve Lewit: Especially this year.
Gabriel Lewit: Yeah. There’s some dogs in the portfolio that you want to sell off and maybe reposition to something better. But the benefit of that tax-wise is you harvest those losses to offset against any other gains, or even your ordinary income up to $3,000 each year. And then you can carry those losses forward as well indefinitely through your tax returns.
Steve Lewit: Do you think he tells his friends about the dogs?
Gabriel Lewit: The dogs?
Steve Lewit: What do you think?
Gabriel Lewit: Now I’ve got these dogs that didn’t do so good this year. No, most people don’t. They like to talk about the winners.
Steve Lewit: Well, I never hear… I was talking-
Gabriel Lewit: Are the winners the cats?
Steve Lewit: I guess. I guess it has to be. I was working out last night and a friend was working out next to me and he just kept telling me all the things that he’s buying that are going up in value. I said, “So everything you buy goes up in value? He’s kind of like, “Well, yeah, kind of,” but he would not talk about his losses.
Gabriel Lewit: Yeah, that’s human nature, obviously, right? We only all make great decisions and never any poor decisions.
Steve Lewit: Never. Never.
Gabriel Lewit: All right, yeah, so those were two stocking stuffers for you. Let’s see the other, I’m going to pick another one here. Take a look at your estate plan. These are some fun financial stocking stuffers for you.
Steve Lewit: Yeah, I’ve never had so much fun in my life during my estate plan.
Gabriel Lewit: I mean, just what else would you want in your stocking?
Steve Lewit: I spend hours, yes, playing with my estate plan.
Gabriel Lewit: Yeah, so your estate plan, these are kind of quick hits, right?
Steve Lewit: It’s really…
Gabriel Lewit: Stocking stuffers usually are these quicker little items, but do you have an estate plan? Re-review that if you don’t, maybe you should have one. Are your beneficiaries-
Steve Lewit: Well, explain what an estate plan is.
Gabriel Lewit: Estate plan at kind of minimum, is going to be a collection of documents. Typically, a trust, a will, powers of attorney, a healthcare power of attorney, a financial powers of attorney, a pour over will, and sometimes a spattering of other things.
Steve Lewit: Living will.
Gabriel Lewit: Yep, living will.
Steve Lewit: Yep.
Gabriel Lewit: Okay, so those collection of documents, as well as a plan for how your assets are going to be distributed upon your passing, are considered an estate plan.
Steve Lewit: Now, a lot of people when they hear the word estate, think estate means, I have a lot of money.
Gabriel Lewit: No, if you have $1, you have-
Steve Lewit: Have an estate.
Gabriel Lewit: You have a small estate, it’s not a very large estate, but you do still have an estate. It’s the collection of all your assets, goods, things, valuables, etc.
Steve Lewit: Yeah. So when you pass, your estate needs to pass on to somebody, and either that can go to probate or it can cost you a lot in taxes, or properties may not be handled properly or have to be sold in a panic to pay taxes. And that’s what you need to plan for in your estate plan.
Gabriel Lewit: Yeah, and if you have none, as we’ve said, come talk to us, we can help you get organized there. If you do already have documents, are they old and need updated? We’ve had a few conversations like that of recent weeks. It’s just a good time of year to check on some of these things.
Now in the spirit of holiday giving, you can also gift with your money, which is oftentimes something that you want to do before year end. Okay? Now, if you’re charitably inclined and you want to itemize on your tax returns, you have to give enough to overcome what’s called the standard deduction. Okay? So when you do your taxes, you get to deduct some income on your taxes, called a standard deduction. Some people think if they donate $1,000 to charity, they get to write that off. The problem is, is if that doesn’t exceed your standard deduction, you can’t actually write that off.
Steve Lewit: With all the other-
Gabriel Lewit: With all-
Steve Lewit: … deductions.
Gabriel Lewit: Yeah. You have to itemize to be greater than your standard deduction. So, you can get into things called charitable bunching strategies or giving enough. If you gave $20,000 for example, then perhaps that plus your other deductions if you itemize, would exceed the standard deduction and then you’d actually start getting some tax benefits for those gifts as well.
Steve Lewit: Yeah. The standard deduction, if you all recall, was raised and it’s so big now that most people do not itemize anymore. And that was a big incentive for having a mortgage, getting the deduction for the interest on the mortgage. That’s all part of the standard deduction for most people.
Gabriel Lewit: Yep, so the gift-
Steve Lewit: So, if I want to give money to my kids?
Gabriel Lewit: Well, gifting has, if you’re gifting money to family members, friends, there is an annual gift exclusion per donee. Okay? Donee is the person receiving the gift.
Steve Lewit: Per donee, yes.
Gabriel Lewit: Donee, donor?
Steve Lewit: No, per the-
Gabriel Lewit: Donor is the person giving the gift.
Steve Lewit: Giving.
Gabriel Lewit: Donee-
Steve Lewit: The donor has the limit.
Gabriel Lewit: What’s that?
Steve Lewit: The donor.
Gabriel Lewit: No, that’s incorrect.
Steve Lewit: We’re going to confuse.
Gabriel Lewit: That’s incorrect.
Steve Lewit: Folks, did you hear that? He told me I was wrong.
Gabriel Lewit: If you-
Steve Lewit: The donor-
Gabriel Lewit: You don’t have one $18,000 gift to limit per year as the donor.
Steve Lewit: I-
Gabriel Lewit: You could give 18,000 to each of your kids.
Steve Lewit: Yes.
Gabriel Lewit: Right? That would be greater than an 18,000 gift for the donor.
Steve Lewit: That’s correct.
Gabriel Lewit: But it’d be under the 18,000 gift per donee.
Steve Lewit: So, if a donee gets more than 18,000-
Gabriel Lewit: You have your lifetime exclusion.
Steve Lewit: Hold on a second. Hold on there, young man. You whippersnapper. Let me whippersnap you. So, if you give me more than 18,000, let’s say I get 18,000 from you and 18,000 from your wife. Now do I have a liability? Let’s say I get $100,000 from you.
Gabriel Lewit: You, the donee?
Steve Lewit: I’m the donee, yes.
Gabriel Lewit: Yeah, no, you don’t ever have to worry about the taxes. It’s the donor.
Steve Lewit: Yeah, that’s what I was saying before. Okay.
Gabriel Lewit: No, you were saying the donor had a max of 18. Anyway, we’re getting off track here.
Steve Lewit: Well, I just needed to correct you because you were saying something implicitly incorrect, but that’s okay. Let’s move on. The audience is with me, I can feel it.
Gabriel Lewit: Sure. Whatever you say, sir.
Steve Lewit: Okay.
Gabriel Lewit: Yeah, in the spirit of moving on, we’ll move on.
Steve Lewit: Okay, so the donor can make $18,000 gift.
Gabriel Lewit: We’re moving on. You can gift at the end of the year. If you want clarification on this, email us individually and we will clarify this for you, no problemo.
Steve Lewit: Producer Katie’s getting really annoyed at us.
Gabriel Lewit: All right. I just wanted to say that if you wanted a gift, you got to do so by the end of the year. Okay.
Steve Lewit: Yes.
Gabriel Lewit: Period.
Steve Lewit: Period.
Gabriel Lewit: All right. All right. The other last stocking stuffer before we’ll do a short commercial break or something.
Steve Lewit: We need a commercial break.
Gabriel Lewit: We’re going to do an interlude I think.
Steve Lewit: We need one right now.
Gabriel Lewit: All right? Is-
Steve Lewit: Those drinks are sounding better and better.
Gabriel Lewit: It’s a good time to think about your holiday spending. Okay? Your budget, the year-end, was I on track for my savings goals for last year? Did I achieve all the things that I was looking to do? Kind of a little bit of a retrospective, if you will, because at the start of the year you’re often setting resolutions. I like to think at the end of the year it’s a good time to see how you did, and not just on money items. Perhaps you do a little retrospective on life. Did you do what you wanted to do for fun? Did you take the time off from work you wanted to take off? Did you spend the time with your significant other that you wish you spent?
Steve Lewit: Yeah, that’s great advice.
Gabriel Lewit: A little, yeah, holiday stocking, financial/non-financial stuffer there for you.
Steve Lewit: Yeah, I would add one last stuffer, that if you find a credit card in your stocking for Christmas, do not use it. This is the time to really watch your spending and not overspend yourself into debt that you can’t pay off right away and wind up paying, what is it, 23%, 24% interest on your credit card.
Gabriel Lewit: I will just say if you’re receiving a credit card with your own name on it in your stocking, that’s a terrible gift because you’re just giving somebody debt.
Steve Lewit: Yes, yes, yes.
Gabriel Lewit: So, no.
Steve Lewit: Yep.
Gabriel Lewit: All right, well there might be more holiday topics next time. In fact, I know we’re going to talk about Merry retirement facts leading up to Christmas in one of the next shows, but we’ll circle back to that on the next one.
Steve Lewit: Maybe we should talk about gift-giving.
Gabriel Lewit: Let’s move on-
Steve Lewit: Let’s move on.
Gabriel Lewit: … from that. Okay, now, actually I did have some fun little interludes that I wanted to share with you before we move on to our next topic. By the way though, if you have questions on any of the things that that brought up, giving, obviously questions might abound on that. You’ve got rebalancing.
Steve Lewit: We were so clear, though.
Gabriel Lewit: We have any of the things we talked about there. Give us a call, (847) 499-3330, or go to Sglfinancial.com, click contact us.
Okay, so here are my interludes for you. I almost decided to start with these and then I wanted to start with the holiday spirit here. There are now some projections since the election has transpired of what the S&P, people love to prognosticate here. What will the S&P do in 2025?
Steve Lewit: Right now, it’s six. Can you look up the exact S&P?
Gabriel Lewit: I believe it’s 6,078?
Steve Lewit: 55, or? I-
Gabriel Lewit: Yeah, let’s see here.
Steve Lewit: Let’s see who’s closer here.
Gabriel Lewit: Hold on, hold on.
Steve Lewit: Hold on, everybody. 6,000-
Gabriel Lewit: 6,091.
Steve Lewit: You were closer, you win the prize.
Gabriel Lewit: I do?
Steve Lewit: Yeah.
Gabriel Lewit: Yeah, so S&P is flirting here with 6,100. Seems to not quite want to get over that threshold. So this is of course the time where people start saying, “What’s it going to do next year?” We, of course, if you listen to our podcast regularly, like to talk about how wrong people’s forecasts are and we’ll have to go back to what was forecasted for this year to give you that analysis. We typically will do that at the start of the year.
Steve Lewit: Yeah, in February, I think we get a list of 500 different predictions for the year and they’re all different.
Gabriel Lewit: Yep, and I just got the first one for 2025 that I’ve seen. So that’s why I just thought it was kind of interesting to bring up. Bank of America thinks the S&P 500 will hit, I’m not making this up, 6,666.
Steve Lewit: Extraordinary, yeah.
Gabriel Lewit: To the T. Yeah, they don’t give a range, they give an exact number. 6,666 by the end of ’25.
Steve Lewit: Which is about a 10.5% gain.
Gabriel Lewit: A little less, I think, right?
Steve Lewit: From now.
Gabriel Lewit: No. Oh, I think when they wrote this maybe, but if we’re already at 6,100.
Steve Lewit: Yeah, 10% would be-
Gabriel Lewit: Yeah, you’d be above that.
Steve Lewit: Yeah, it would be 9%.
Gabriel Lewit: Yeah, eight or 9% higher than where we are today. Okay? Now what do you do with that information? I’m not so sure exactly what you would do with it. What I’d do with it is I say, “Okay, depending on what we think the market’s going to maybe do next year, it’s obviously not being predicted here by this party that it’s going to have another 20, 30% gainer of a year. Right? So it’s a bit more of a modest year, if not a pullback. I actually am more in the camp, I do think there’s going to be a bit of a pullback next year or the risk of one. Maybe you look at buffered strategies, you look at other options, things that maybe protect your money and still give you that eight or 9% growth goal if you thought that that was really the range at which the S&P was going to perform next year.
Steve Lewit: Yeah. You have to decide whether the pain of loss, losing money possibility is worth the risk of gain. And for most people, Gabriel, it’s the losses that they really, the joy of gain is temporary, but when you lose money in the market, it kind of sticks in your craw and people don’t like that.
Gabriel Lewit: Yeah. Well, here’s what, a real life example that I think is interesting about this number. And I’m not a proponent of market timing. Everybody here that listens to the show knows that about us or about me.
Steve Lewit: Why would you say only you?
Gabriel Lewit: I said I was not a proponent, so I was just sticking with the I.
Steve Lewit: Neither, well, I am.
Gabriel Lewit: But we are not.
Steve Lewit: We are not.
Gabriel Lewit: You can buy a, let’s say you had an IRA, so no tax consequences here. You could buy a 100% buffered ETF, okay, that essentially has right around that 8% cap. So-
Steve Lewit: An 8% cap means if the S&P goes up 10%, I only make eight?
Gabriel Lewit: Eight, yep.
Steve Lewit: Okay.
Gabriel Lewit: And if it goes up nine, you make eight, if it goes up six, you earn six, five, you earn five. But if it goes down, you are 100% protected, okay?
Steve Lewit: Yes, cannot lose money.
Gabriel Lewit: So, this is the idea behind a buffer fund, if you-
Steve Lewit: Not an annuity.
Gabriel Lewit: Not an annuity, this is just a buffered fund ETF.
Steve Lewit: Right.
Gabriel Lewit: The idea is if you really felt strongly that the S&P only had an eight or nine or 10% potential growth target for 2025, you could achieve that with substantially less risk than an un-buffered S&P 500 fund.
Steve Lewit: Yes, and so that’s why how you feel about your own emotional welfare. So if you think the market is really going to do only 10% and you can get 8% with zero risk, is that emotionally better for you? Will you have more peace of mind about being in the stock market?
Gabriel Lewit: And of course, the reason why folks don’t flock to that is they say, “Well, what if it goes up 20%? I don’t want to lose.” So
Steve Lewit: Yeah, the FOMO rule.
Gabriel Lewit: It’s the FOMO, yeah, fear of missing out. FOMO.
Steve Lewit: FOMO.
Gabriel Lewit: Okay. Next tidbit here is Google says it has cracked a quantum computing challenge with new chip. I just thought this was really interesting, so I’m sharing it with you in the world. Google says that they have overcome a key challenge in quantum computing with a new generation of chip called Willow. The chip is called Willow.
Steve Lewit: It’s a quantum something, right?
Gabriel Lewit: Yep. Now, it is solving a computer problem in five minutes that would take a classical computer, a traditional computer, today’s technology.
Steve Lewit: Like yours and mine.
Gabriel Lewit: Like big hard drives of… More time than the history of the universe.
Steve Lewit: Yes. Yeah. I mean, it’s incomprehensible.
Gabriel Lewit: Yeah. Now, that’s a hard thing for a brain to understand, that how could some new chip solve a problem in five minutes that would otherwise take today’s most powerful computer over more time than the history of the universe has been around. Wrap your head around that.
Steve Lewit: I can’t wrap my… I think about that. First of all, I can’t wrap my head around the history of the universe.
Gabriel Lewit: It’s long.
Steve Lewit: It seems like a long time.
Gabriel Lewit: Billions of billions of years, right?
Steve Lewit: Well, more than that.
Gabriel Lewit: Yeah, probably.
Steve Lewit: Probably billions and billions, but it’s incomprehensible that technology could do that.
Gabriel Lewit: Yeah. Now, it says it came from a new chip called Willow that has 105 qubits, which stand for quantum bits. Now if you really want to pull your hair out here, try to understand this. A qubit is a two-state or two-level quantum mechanical system, one of the simplest quantum systems displaying the peculiarity of quantum mechanics. Okay, what?
Steve Lewit: Well, quantum mechanics are really interesting-
Gabriel Lewit: But-
Steve Lewit: … because in quantum mechanics this has got even stranger, you can be in two places at the same time.
Gabriel Lewit: Yeah, yeah. So this is-
Steve Lewit: So, inside these qubits they’ve got-
Gabriel Lewit: I’m trying to picture what this is. There’s 105 of these qubits, what is it?
Steve Lewit: It’s the little particles that transmit electricity through silicon.
Gabriel Lewit: Well, so apparently qubits have a way of having high error rates. Okay? There was something here that said… Hold on, hold on, I thought this was really interesting. Qubits are fast but error-prone because they can be jostled by something as small as a subatomic particle from events in outer space.
Steve Lewit: Yes, quantum mechanics is so foreign into us because it’s not linear.
Gabriel Lewit: But I’m trying to picture, what is this qubit? What does it look like if it can be jostled by a subatomic-
Steve Lewit: It looks like this.
Gabriel Lewit: … particle?
Steve Lewit: It looks like nothing.
Gabriel Lewit: I go to the computer store, and I buy Intel inside. It’s a computer with a chip, but I can’t imagine what this looks like.
Steve Lewit: Did you have, open the chip to see what’s inside?
Gabriel Lewit: Something that gets jostled by subatomic outer space particles?
Steve Lewit: Well, some things are very sensitive.
Gabriel Lewit: Whoo, anywhos. Pretty interesting, right?
Steve Lewit: Yeah.
Gabriel Lewit: Now there are no current practical applications for this, but people think in the future it could open up multiverses and time travel and gosh, who knows what else? So, stay tuned.
Steve Lewit: Yeah, I love this stuff.
Gabriel Lewit: All right, that was today’s tidbit.
Steve Lewit: Yeah, good choice.
Gabriel Lewit: Okay. All right, all right, let’s move on.
Steve Lewit: No more? I thought there was one more.
Gabriel Lewit: Well, there was, but I didn’t know if I wanted to use our time with that or a financial topic. You decide.
Steve Lewit: I can’t figure out. I’ve got so many pages. Which one was it?
Gabriel Lewit: Well, we can either talk about no more sad lunches because we said we were going to talk about that.
Steve Lewit: Oh, we’re back to the cooking.
Gabriel Lewit: Or we can talk about, hold on, how you can invest money that you might need to use in a really short-term timeframe.
Steve Lewit: I think we should do cooking next week and money this week.
Gabriel Lewit: Yeah, okay.
Steve Lewit: Because a short-term timeframe could be Christmas or it could be six months or nine months. And this is really, this time of the year, money is on the mind of everybody and spending, I think.
Gabriel Lewit: Yeah. So we’ll punt one more time on super sandwiches here, so, stay tuned. So, next week you’ll have all the know, I got it all circled and ready for you.
Yeah. So this topic here, I was talking with a client recently that was looking to buy a home and he was trying to decide whether to buy it in this March coming up, or the following March, currently renting for a year. Okay? Now, if he was going to buy this March, he was already to sell his funds that are in aggressive stocks right now that have done very well this year, and this is kind of a sister-cousin topic, whatever, relative of the rebalancing, okay? Not a sister-cousin that doesn’t exist, but I meant sister, cousin.
Steve Lewit: In some communities that might exist.
Gabriel Lewit: Okay. Oh my gosh. Someone kick you under the table, please.
Steve Lewit: I got three kicks already.
Gabriel Lewit: Okay. Yeah, but now he said, “I’m not going to buy this house until the following year.” So we had this conversation about what I call de-risking, because up until this point, it was the first he had mentioned to me that he was thinking of buying a home, which is why it wasn’t a little bit more secure prior to that point. But the thought was, okay, markets are high right now. You’re looking to buy, put $120,000 down in this case on a home, in one year. And do you want to keep that money really aggressive in the market, right?
Steve Lewit: Yes.
Gabriel Lewit: So, what’s the risk, right? If he keeps this money in stock going into next year, done great this year, 120,000, planning to use this for the down payment on the home. What are the two, three possible scenarios there? Number one, market goes up, he’s happy, he’s got more money. Option two, market stays relatively flat, you’ve got the same amount of money. Option three, market goes down and the 120 that you wanted to use for your house is now 100,000 or 95 or whatever it would be. Okay?
Steve Lewit: Yep.
Gabriel Lewit: So-
Steve Lewit: Because you have less money.
Gabriel Lewit: You have less money, right, because you lost money due to the market. So in general traditional financial planning sense, money you need for an ultra-short time horizon, like one year or six months or a year and a half, we would typically recommend you go the more conservative route there.
Steve Lewit: The question is, when do you need it liquid? When do you need that money in your hands? If you need the money in your hands in two weeks, well, it’d be kind of silly to put it in the market and take all that risk.
Gabriel Lewit: Now, if you’re an ultra-risk-taker and you don’t mind that it might be higher or it might be lower-
Steve Lewit: Or you have a lot of money, and I probably lose 10% or 15% and no big deal.
Gabriel Lewit: But in this case, I presented these three options to the client, and he said, “Well I really don’t lose that money that I… I need that money for the house down payment.” So that was the clue right there, is we can’t afford to risk losing it.
Steve Lewit: Until he said, “But I don’t want to miss the gains.”
Gabriel Lewit: No, he actually didn’t say that. Another client said the same thing, “My son is going to college next fall and his money’s done really well in his 529 plan. What do I do with that? Do I keep that allocation going into next year, or do I pull back on the risk level there, knowing that he’s going to need that money now in seven, eight months?” So these are ideas of really short-term time horizons and what we call de-risking. And there are certain investments that are better suited for those six month, one year, two year, three year time horizons, where stock can be, of course, it can giveth and it can also taketh.
Steve Lewit: So, Gabriel, what would you consider a short-term time horizon? Is it less than five years, or-
Gabriel Lewit: Well-
Steve Lewit: What would you say?
Gabriel Lewit: People have asked me it before. I say short-term is one to three years. Medium term is three to seven. Long-term is usually seven, I think seven’s fairly long-term, to 10. And then very long term is 10, 12, 15 and beyond. Right?
Steve Lewit: Got it.
Gabriel Lewit: In this case, very short term would be one year, six months, one and a half years…
Steve Lewit: So, if I have very short term, where should I put my money?
Gabriel Lewit: Yeah, you’ve got CDs, money market accounts, you’ve got cash.
Steve Lewit: Short. Six months CDs.
Gabriel Lewit: Checking accounts, savings accounts.
Steve Lewit: Saving accounts, high interest savings accounts. Okay, so that’s liquid for year. What about two years out?
Gabriel Lewit: I mean, if you have at least one full year, you could do one-year CDs, two-year CDs. You could do the buffered funds we talked about.
Steve Lewit: Yep.
Gabriel Lewit: 100% buffer protection, earn up to 8%.
Steve Lewit: Where I might make zero, but I won’t lose anything. You could buy MYGA, a multi-year…
Gabriel Lewit: If you’re over 60, you could do a MYGA, a two-year MYGA, which is a multi-year guarantee rate annuity.
Steve Lewit: Little better rates than CDs.
Gabriel Lewit: Some people like short duration bonds, treasuries for example, shorter terms. And some like bond funds, 100% bond funds for a really short term time horizon, but those can be a little bit volatile.
Steve Lewit: Now, the fun really starts when you’re five years out because you have so many choices. You can do buffer or structured products, you can do structured notes, you can do five-year growth annuities, you could do the stock market in a conservative portfolio.
Gabriel Lewit: Well, you could also do a structured note in a one-year time horizon.
Steve Lewit: Definitely, yeah, and keep renewing it. Yep.
Gabriel Lewit: There are structured notes are usually either six-month callables or one year non callables or two years, the different terms. And those could generate you, I’m just putting numbers out here, these aren’t exact, no disclosures needed. I’m not giving names, but seven to 10% potentially, with some risk in a structured product, but generally a lot less than you’d have in a unstructured product or un-buffered market-based fund, for example.
Steve Lewit: Yeah, I think the point is whatever term you’re in, short term, medium term, there’s a product that fits that term where that money will be liquid when you need it, and you reduce the risk of having less money exactly when you need it. And then having to sell in the stock market when it’s low, which also leaves less money to recover when the market comes back.
Gabriel Lewit: Now, last point here. Keep in mind, no, you can’t win if the market goes down and also win equally when it goes up and also win if it’s flat and have the best of all worlds.
Steve Lewit: Really?
Gabriel Lewit: Because that’s always… Well, I don’t want to go down if the market’s down. I don’t want to lose money if the market’s down. And I like the fixed rate, but I want to earn more if the market’s up. It’s like, yeah, who doesn’t?
Steve Lewit: That’s called having your cake and eating it.
Gabriel Lewit: Yes, so everybody of course wants that. If that product existed, I think it would be quite popular.
Steve Lewit: Yes.
Gabriel Lewit: And we would all know about it.
Steve Lewit: For sure, yep.
Gabriel Lewit: Yep. So that’s our show for you today. We hope you had some fun along here with us. We of course are wishing-
Steve Lewit: I want to go look in my stocking stuffers.
Gabriel Lewit: Yeah, you’ll probably have different gifts in your stocking stuffers if you have those. And whatever you celebrate this holiday season in this month of December, we are here to celebrate and cheer along with you and wish you a good health and cheer and happiness and whatever else is important to you.
Steve Lewit: Well said, Gabriel. Well said.
Gabriel Lewit: So, thanks for tuning into our show. If you’ve got questions, call us, (847) 499-3330, or go to sglfinancial.com and click contact us.
Steve Lewit: Stay well, everybody.
Gabriel Lewit: Talk to you soon.
Steve Lewit: Bye now.
Gabriel 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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