Jingle All the Way to Financial Growth

Our 2 Cents – Episode #197

Jingle All the Way to Financial Growth

We are back with another “merry” episode of Our 2 Cents! Steve and Gabriel share an update on the winter solstice, marking the countdown to the holidays. They then share retirement tips that will be sure to spread holiday cheer. Next, as part of our cooking series, they offer expert tips for crafting the perfect sandwich. Finally, they discuss why rebalancing your portfolio is key to your financial well-being. Listen in now using a link below!

  1. Embracing the Winter Solstice:
    • On Saturday, December 21st, the winter solstice will mark the shift to colder weather, bringing with it the promise of longer days and a bit more sunlight.
  2. Financial Facts to Boost Your Holiday Spirit:
    • Discover uplifting financial facts that provide a clearer understanding of the current financial landscape.
  3. No More Sad Lunches!:
    • Learn the secrets to crafting the perfect sandwich—yes, the right ratios make all the difference!
  4. Rebalancing Your Portfolio:
    • Dive into the concept of rebalancing your financial portfolio and discover how it can positively impact your long-term financial growth.

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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 Steve Lewit here for our holiday special.

Steve Lewit: And happy holiday and New Year’s. I guess that’s part of the holiday.

Gabriel Lewit: Are you going to sing Merry Christmas-

Steve Lewit: No.

Gabriel Lewit: … to everybody, even though you’re Jewish?

Steve Lewit: That doesn’t matter.

Gabriel Lewit: You’ve got the better singing voice than me.

Steve Lewit: I used to sing at Christian funerals, and I would sing from some of the Psalms music. I love it. It’s just great.

Gabriel Lewit: Well, hopefully you’ve gotten your holiday shopping for you. Christmas celebrators out there. You’ve got that done. It is coming up by the time you get this podcast

Steve Lewit: Coming up. And weddings too, by the way.

Gabriel Lewit: Wedding shoppers.

Steve Lewit: No, no. I’m still thinking about where I was singing.

Gabriel Lewit: Okay. Yeah, you’re behind me.

Steve Lewit: My inter-religious singing.

Gabriel Lewit: So, you sang at weddings as well?

Steve Lewit: Yep.

Gabriel Lewit: Okay.

Steve Lewit: Yep.

Gabriel Lewit: Yep.

Steve Lewit: Of all religions.

Gabriel Lewit: Back to the show at hand. We were talking about Christmas is coming up this week.

Steve Lewit: I just got lost in my thoughts there for a minute.

Gabriel Lewit: Hanukkah as well.

Steve Lewit: Hanukkah too, I sing for that too. Yes.

Gabriel Lewit: And Festivus for the rest of us, as they say.

Steve Lewit: Yes.

Gabriel Lewit: Okay.

Steve Lewit: I never heard that before.

Gabriel Lewit: It’s from Seinfeld as I often quote. But yeah, we hope you are gearing up for a wonderful, wonderful holiday time with family, friends, or just yourself if you’re going to relax and not work. And today we’re going to fill, I think, your ears with some Christmas holiday cheer.

Steve Lewit: Are you ready at home?

Gabriel Lewit: With a financial theme twist.

Steve Lewit: Yeah. I just need to know, are you ready at home? Did you decorate the tree?

Gabriel Lewit: Oh, we’ve been decorated for a while. I think I mentioned on the show the other day, my son learned that Santa’s not real, which-

Steve Lewit: You did mention that.

Gabriel Lewit: Yeah. But he’s been a good sport. He hasn’t spoiled it for his sisters. I do have to do some last minute gift shopping, which every year tends to be my M.O., as they say, my mo. But yeah, so I’m almost ready.

Steve Lewit: Nice.

Gabriel Lewit: Yeah, getting there.

Steve Lewit: Nice. I’m ready too.

Gabriel Lewit: And we also have our… Just in case anybody is curious, we have our SGL holiday party coming up this Friday, and so we’re going to get our team together. We’re up to, I don’t know if we’ve ever shared this on the show, I think we’re up to 24 full-time people now here at SGL Financial. So our team keeps growing. We’ve had a great year.

Steve Lewit: And two more to come on board.

Gabriel Lewit: We’re going to continue to grow into next year. And a big part of that is a thank you to our clients out there as we get closer and closer to wrapping up this terrific year.

Steve Lewit: Absolute, absolute.

Gabriel Lewit: Okay. So I’m going to talk about 12 merry holiday financial facts. But real quick, just to fill you with some other good news and cheer, the winter solstice, by the time you hear this podcast, will have just occurred. It’s happening this Saturday on December 21st, and that is when the Earth, well, the Earth travels around the sun. It does so at an angle, and for most of the year, the Earth’s axis is tilted either toward or away from the sun and the solstice marks the time of the year when the Earth is at its most extreme tilt toward or away from the sun.

Steve Lewit: Yeah. Furthest away when it’s cold.

Gabriel Lewit: Yeah. So what that means is the amount of sunlight you’re going to get is every single day, this is the good news piece…

Steve Lewit: I can’t wait.

Gabriel Lewit: It’s going to get a little bit lighter, a little bit brighter, every single day all the way back till we get to summertime.

Steve Lewit: Yeah, it’s revivifying.

Gabriel Lewit: Revivifying. There you go.

Steve Lewit: Yeah. I can’t wait. I just despise the darkness.

Gabriel Lewit: Yep, yep.

Steve Lewit: Yeah, I don’t like it.

Gabriel Lewit: And apparently, we did talk about this once on the show many months ago about daylight savings time, and I’ve heard some smatterings that the new administration may be seeking to eliminate the daylight savings time.

Steve Lewit: Well, they’ve been trying to do it for a number of years, and they couldn’t get the votes, but there is some inkling now that they will get the votes, and I think that would be great.

Gabriel Lewit: Although from what I’ve heard is they were talking about keeping what we have now as opposed to the hour when you have more daylight in the summertime.

Steve Lewit: Well, that would be silly, wouldn’t it?

Gabriel Lewit: Which I was excited, and then I read that, I’m like, no, that’s not what I want.

Steve Lewit: No, don’t do that.

Gabriel Lewit: Yeah. Anyways, different opinions on that.

Steve Lewit: Okay. Mr. weather person or what’s a person that’s… Yeah, I guess.

Gabriel Lewit: A weatherman.

Steve Lewit: Yeah. So what is the difference between a solstice and an equinox?

Gabriel Lewit: Yeah, you got me.

Steve Lewit: Okay. So the equinox is when both hemispheres get the same amount of sunlight, and I think that’s the beginning of autumn and spring. I think when autumn starts and spring starts. I think those are the equinoxes.

Gabriel Lewit: If it’s autumn here, it’s spring there. And if it’s spring there, it’s autumn here. I know if it’s winter here, it’s summer in the Southern Hemisphere, I think. Something like that.

Steve Lewit: Oh wait.

Gabriel Lewit: Anywho.

Steve Lewit: Producer Gabby has just given me spring and fall… The Earth’s actually… Yeah, the word…

Gabriel Lewit: Okay. Well, you’re mumbling. We’ll move on. So anyways, that was my cheerful news for you. And then now we’re going to move into the 12 merry retirement facts that I’ve been hinting at here. And so what are these? Well, we often talk about financial challenges, problems that exist with planning, investment issues, tax concerns. We focus often on things that are challenges that we could get better at. What I wanted to focus on this time today are some good news items. So these are, again, 12 merry retirement facts here for 2024. And I’m going to start with number one here. There are now nearly 900,000 retirement account millionaires. And so Fidelity did a recent study, third quarter here, 2024, that shows the number of people with more than 1 million saved in their 401k accounts on its platform has jumped by nearly 10%.

Steve Lewit: Yeah, this is just Fidelity’s count. This isn’t nationwide.

Gabriel Lewit: Yeah.

Steve Lewit: Yeah. That’s quite a lot of millionaires when you think about it.

Gabriel Lewit: Yeah, there’s probably, maybe there’s more than at Fidelity. There was just I think 500,000 or so. But yeah, apparently there are now over 900,000 retirement account millionaires across various custodial platforms, which doesn’t seem like a lot, but at the same time, it is a lot.

Steve Lewit: Well, think about it this way, if you’re a millionaire, you are in probably about the top four or four and a half percent of people in the country. And this might be indicative, I know we’re talking about merry, but it might be indicative that there’s a spread happening between the wealthy and the less wealthy.

Gabriel Lewit: You’re going down an unmarried path there, sir, I’ve got to stop you.

Steve Lewit: That’s all I’m going to say about it.

Gabriel Lewit: There are also-

Steve Lewit: Because I am filled with merry today,

Gabriel Lewit: Yes, you should be. And there’s also over 418,111 IRA millionaires, not just 401k, but IRA millionaires to add on top of that. And we hope, and we want to help you become one of those if you are not currently there.

Steve Lewit: Yeah, no, millionaire could be multimillionaire.

Gabriel Lewit: It could be.

Steve Lewit: Not just a million…

Gabriel Lewit: Means one million plus.

Steve Lewit: That’s correct.

Gabriel Lewit: Yep. Now, the average balance in some IRA balances has increased over 40% since 2014. That’s just what the report says. I would say it should go up a lot more than that, my rough math. But point is, here’s the merry news is people’s account balances are growing. That’s the merry news.

Steve Lewit: Yes

Gabriel Lewit: Yes.

Steve Lewit: Yeah.

Gabriel Lewit: So, it may not be growing as much as you want. In fact, I just had a client meeting earlier today with somebody that’s exploring using SGL, and one of his concerns was that his account grew, it just didn’t grow as much as he wanted it to grow. And then we’re going to help him with some of that.

Steve Lewit: Yep, sure.

Gabriel Lewit: All right, next up on the list of merry financial facts here, or retirement facts. There are now fewer than one in four that feel they won’t reach their retirement goals. Okay, so only 23% of people think that they’re not going to reach their goals. So said in a more merry way. 77% of people, did I do that right? 23, yeah. 77% of people do think they have a good chance of meeting their retirement goals.

Steve Lewit: Which is terrific. And that’s a vast improvement than it was. I think I remember the statistics from two or three years ago, and I think it was just the opposite.

Gabriel Lewit: Well, there’s different studies and who knows, right? But yeah, I thought this would be some good news for you out there. Hopefully you fall in a camp where you are… Well, obviously if you’re with SGL Financial, you’re going to feel very confident that you’re going to reach your financial goals. We want to help you with that.

Steve Lewit: Yeah. There’s also a note here about optimism. That 48% report an improvement in their optimistic outlook. How did I do that, right? With an optimistic outlook towards the future, as opposed to 23% reporting a decline last year.

Gabriel Lewit: Interesting.

Steve Lewit: So, people are feeling better.

Gabriel Lewit: So, two out of three have established an emergency savings fund. So that’s a big jump up from 2023 where people were dipping into their emergency savings fund more than… Now they’re saving a bit more. Okay, so that’s good news. We’ve got nine out of 10 with access to a 401k have reported that they are contributing to that 401k.

Steve Lewit: Did they give the percentage increase of that? Because that’s a big improvement.

Gabriel Lewit: Well, it’s not giving an improvement percentage.

Steve Lewit: It just says a significant increase from the past years.

Gabriel Lewit: And it could be there was a SECURE 2.0 Act that auto-enrolled people, which is probably having part of that intended effect, which is to get more people to contribute to their 401k.

Steve Lewit: Yeah. And what that was, folks, is they felt not enough people were participating in the 401k, so they reversed it. They said, “You don’t have to join the 401k. We’re enrolling you in the 401k and you have to opt out.” So a lot of people are now contributing to the 401k, who wouldn’t have contributed in years before.

Gabriel Lewit: Indeed. More savers and investors, according to Charles Schwab, number six here are actively seeking retirement advice. Now, some are getting advice. The most biggest chunk, actually, 39% are trying to get advice directly from their 401k plan. Maybe not the best source, just generally, it’s a call center with very limited guidance.

Steve Lewit: You can get some basic information there, but they’re not going to produce a detailed retirement plan.

Gabriel Lewit: Correct.

Steve Lewit: Or anything like that.

Gabriel Lewit: But it’s good that people are seeking advice followed closely by 35% from their financial advisor, 27% from family and friends, and 25% directly from their employer, which I’m not sure what you’ll get there. And apparently 61% are comfortable asking AI tools like ChatGPT. Yeah, okay.

Steve Lewit: Okay.

Gabriel Lewit: That is an option.

Steve Lewit: That’s a very high percentage.

Gabriel Lewit: It is.

Steve Lewit: That’s more than half the people out there think ChatGPT can do better than…

Gabriel Lewit: Who says how many-

Steve Lewit: … Live advisor.

Gabriel Lewit: … People comfortable asking it for help? But I will expand upon that. Only 19% of those then said they are very likely to follow the computer-generated recommendations.

Steve Lewit: That makes me feel better. At least you inquire, but you don’t follow it blindly.

Gabriel Lewit: And this one, I know I’m supposed to be merry. This one was, I guess it’s not super bad, but it says only 60% are likely to follow human professional advice they receive. So you’re getting advice from a human professional, but then you’re not following it.

Steve Lewit: At a level of 60%. Well, we know we that-

Gabriel Lewit: 60% will follow it.

Steve Lewit: Yeah. I’m saying how many people do we meet Gabriel where we provide advice and they say, “No, I don’t want to do it that way”?

Gabriel Lewit: Well, it is one of the reasons why I’m not a big fan. People come to us from time to time, “Gabe, SGL, do they provide a… I’ll pay you a fee and you give us a plan.” And I’ve done this more than a handful of times, probably 10, 15 times. I don’t know. I lost track. But most of those people do not actually then implement the advice that they pay for. It varies-

Steve Lewit: If they just buy a plan?

Gabriel Lewit: Yeah. We follow up, we check in on them. “Did you get this implemented?”

Steve Lewit: “Did you do that?” “No.” “What about that other strategy?” “Well, I took it to another advisor and he said it was no good.”

Gabriel Lewit: Various reasons, but it’s kind of funny. Okay, back to the good news here. A solid majority feels like their savings warrants professional advice. Okay. So that’s showing that more people feel like they are at a place where they do need advice versus don’t, which is good news. More people are owning IRAs than ever before. That’s good news. That was number eight here.

Steve Lewit: Did they say anything in here about Roths?

Gabriel Lewit: This one does not.

Steve Lewit: No.

Gabriel Lewit: Oh, well actually it does here. Yeah. This change was driven mostly by a sharp increase in Roth IRA ownership.

Steve Lewit: Nice.

Gabriel Lewit: Very good news.

Steve Lewit: Very good news.

Gabriel Lewit: Okay. Number nine.

Steve Lewit: Good work out there.

Gabriel Lewit: What’s that?

Steve Lewit: Good work out there, people.

Gabriel Lewit: Oh, I thought you were saying good work out.

Steve Lewit: No, not work out.

Gabriel Lewit: I was like, what does that…

Steve Lewit: No, no. Listen carefully. Good work, out there, people.

Gabriel Lewit: There we go. There we go. Okay. Number nine. Retirement accounts are clearly associated with higher wealth. Okay, well that’s from another survey. I’m just reading these off the list here.

Steve Lewit: I actually don’t know what that means, but it sounds good.

Gabriel Lewit: It’s saying those with IRAs have substantially higher net worth than those without. So basically saying people that save more, have more, which I guess is true.

Steve Lewit: Is true.

Gabriel Lewit: Yes. That’s good news.

Steve Lewit: Sounds true to me.

Gabriel Lewit: Yeah. Well this one is really just re-emphasizing the other one. More Americans are embracing the Roth IRA accounts. Great. Savings rates are at an all-time high. Number 11. And last but not least, just to get to all 12 of our merry retirement facts here. Catch-up contributions are increasingly being used. Catch-up contributions are for people over 50 where they get the ability to save even more than the under 50 max amounts. And more people are actually using those catch-up contributions.

Steve Lewit: So, what does all this merry mean to you?

Gabriel Lewit: It means people are placing a priority on their financial future more and more.

Steve Lewit: More and more.

Gabriel Lewit: Which I think is great.

Steve Lewit: Yep.

Gabriel Lewit: And we are here to help you with that.

Steve Lewit: And I think what it says to me is people are starting to think more long term. It’s like, I need to plan this out. I need to think about it a little more. I’m going to go to ChatGPT. I’m going to go somewhere to get advice whether I listen to it or not as a different story. But it’s more tremendous amount of information out there about what you can do. But more people seem interested from our perspective, folks, more and more people we talk to, they’re very interested in planning, which is at the heart of what we do. And that’s very encouraging for us. When I started in the business, planning was like, nobody planned really. And that has evolved over time. And now the market seems to want planning a lot more than it did years ago.

Gabriel Lewit: I agree. I think it’s great to see. Well, I don’t know if there’s per se anything there that you would have questions about. We just wanted to share all those merry facts with you to put a nice bow on the end of 2024 here.

Steve Lewit: A merry bow.

Gabriel Lewit: A merry bow. Yeah. Although we will have one more episode before the end of the year, so don’t worry, we’ll be back next week.

Steve Lewit: That will be our merry bow.

Gabriel Lewit: But yeah, if you have questions, of course on anything there or we can help you with your savings, investments, retirement planning, give us a call here at 847-499-3330 or go to SGLfinancial.com and click contact us. Now, I do have another financial topic for us to round out today’s show, but little brief interlude here. We’ve promised, we’ve promised again, now we must deliver.

Steve Lewit: We must.

Gabriel Lewit: How to make a better sandwich: No more sad lunches, is what the title of this article is called.

Steve Lewit: We’ve been postponing the continuation of this subject and I’ve gotten multiple emails of disappointment.

Gabriel Lewit: Yes. Yes.

Steve Lewit: That we haven’t had it on the schedule.

Gabriel Lewit: Okay, well, we’re just going to do this fairly quickly. So here are the tips. Okay. If you’ve ever felt like you make a very poor sandwich at home, but when you go to a store or a restaurant, you get a much better sandwich. These tips are for you.

Steve Lewit: Yes.

Gabriel Lewit: Also, of interest. It really is true. When somebody else makes a sandwich for you, it always tastes better than when you make it yourself. I don’t know why.

Steve Lewit: I think that goes-

Gabriel Lewit: One of the unknown rules of the world.

Steve Lewit: I think that goes for dinner, breakfast, lunch. I love when other people cook.

Gabriel Lewit: But here’s your tips. Okay. Number one, use better bread. Okay. “The biggest mistake people make,” says Morrow, who co-hosts the Kitchen on Food Network, “is that the bread that they use is subpar bread.” There you go. Okay. Now it’s where your teeth in your taste buds start and end, every bite, it’s the foundation and the roof of every sandwich. “Get better bread,” he says. Okay.

Steve Lewit: Or bake your own.

Gabriel Lewit: Yeah, you could do that. Your daughter, my sister, has learned to make a very mean sourdough.

Steve Lewit: Did you get your loaf?

Gabriel Lewit: I have had some. It’s delicious.

Steve Lewit: It’s really outstanding.

Gabriel Lewit: And speaking of which, the chef V. Nguyen here, Director of Culinary Operations at Virginia-based Thompson restaurants, recommends ciabatta.

Steve Lewit: Ciabatta.

Gabriel Lewit: Ciabatta bread, sourdough

Steve Lewit: Ciabatta, ciabatta.

Gabriel Lewit: Croissants.

Steve Lewit: Croissant. Oh, I love croissant.

Gabriel Lewit: Croissant. Or a French baguette.

Steve Lewit: Ah. Oh, high calorie.

Gabriel Lewit: Okay. And you can give a mediocre loaf a boost by buttering and griddling them on maybe some kind of panini press or otherwise.

Steve Lewit: You can do it just in your frying pan.

Gabriel Lewit: You could do that too.

Steve Lewit: Yeah, it’s really good.

Gabriel Lewit: There you go. There you have. Okay. That was tip number one.

Steve Lewit: So, you start with the bread.

Gabriel Lewit: Yeah. Number two, hold on, please.

Steve Lewit: What if you’re on a diet? Well, then you can’t have a sandwich.

Gabriel Lewit: Well, if you can’t eat bread, your bread’s not going to do much for you.

Steve Lewit: You could have a lettuce sandwich.

Gabriel Lewit: Okay. Step two, don’t overdo the fillings.

Steve Lewit: I got rejected on that one. The lettuce sandwich. I used to eat lettuce sandwiches from, what was it, John?

Gabriel Lewit: Jimmy John’s.

Steve Lewit: Jimmy John’s. You were always jealous.

Gabriel Lewit: It’s not even… Shouldn’t even be… It is called the unwich. Shouldn’t even be called a sandwich.

Steve Lewit: Well, it’s an unwich.

Gabriel Lewit: Okay. Don’t overdo the fillings, balance is everything. Some guy named Lygizos says. They probably referenced him earlier in the article. I could go back, look for his name. Often people go a bit heavy on the protein, which can throw off the entire sandwich. We found that the sweet spot here is to use six to seven ounces of protein for a large full-size sandwich. It gives a satisfying bite without overpowering the other flavors.

Steve Lewit: Yeah. So what do you think of the sandwiches that are so thick that you can’t bite them? It’s like a mess.

Gabriel Lewit: Yeah. Now here’s-

Steve Lewit: Is that what he is referring to?

Gabriel Lewit: Kind of. Yeah. Morrow, the guy we mentioned earlier, his go-to formula for the perfect bread to filling ratio… Okay. This is for you. Perfectionists out there trying to perfect your sandwich. 20% bread, 20% vegetable, 30% main event, which I assume is the protein, 10% sauce or condiment and 10% pickled or crunch element and 10% cheese.

Steve Lewit: Yeah.

Gabriel Lewit: I’m not sure how to accomplish this, but there you go.

Steve Lewit: Sounds like a Jersey Mike sandwich. Can’t we just order from Jersey Mike’s.

Gabriel Lewit: So, if you got a slice of cheese, is that 10% cheese? How do you know? I don’t know. Is it by weight?

Steve Lewit: No. You got to look at it and make an artistic decision. That’s all. It’s all art.

Gabriel Lewit: Okay. All right.

Steve Lewit: Right.

Gabriel Lewit: Yeah. There we go. Okay, moving on.

Steve Lewit: I’m telling you, just go to Jimmy John’s. They make the best subway.

Gabriel Lewit: Last couple tips here.

Steve Lewit: Oh, you worked at Subway. How did you know?

Gabriel Lewit: When I was in high school, yeah, I was a sandwich artist.

Steve Lewit: Well, Mr. Artist-

Gabriel Lewit: An artiste, I was going to say.

Steve Lewit: How did you know you had the right ratio?

Gabriel Lewit: Well, back then they didn’t make their bread as poorly as they make it now. It is now fluff bread.

Steve Lewit: It’s really no bread.

Gabriel Lewit: My goodness. And back then the footlongs were 12 inches, not 11.

Steve Lewit: Right, but how did you know how much salami?

Gabriel Lewit: We measured every bite, we measured every…

Steve Lewit: So, you had three slices of salami.

Gabriel Lewit: Perfection. You had me, you wouldn’t get a better sandwich than if I made it. Yeah. A Subway.

Steve Lewit: Wow. We should buy a franchise.

Gabriel Lewit: Okay, number three, tip here. Get saucy. Sauces and condiments are important to add moisture to a sandwich, but make sure not to drench the bread. And when applying any sauce, schmear or spread, “Crust to crust is a must,” Morrow says, to ensure each bite is as even as possible.

Steve Lewit: Yeah. It’s very annoying when you get to the sandwich-

Gabriel Lewit: You’ve got to go to the edges.

Steve Lewit: And you bite on the edge and there’s nothing there. And you get to the center and it’s like, “Wow.”

Gabriel Lewit: Now both Lygizos and a guy named Moody, whoever…

Steve Lewit: These are the Lygizos and Moody’s rules.

Gabriel Lewit: … Named Duke’s Mayo as their go-to mayo. “I only have one rule,” he says, “Duke’s or die.” Duke’s is the answer.

Steve Lewit: I’ve never heard of Duke’s before.

Gabriel Lewit: I haven’t either. I’m going to look it up though. I’m going to buy this.

Steve Lewit: Hellmann’s mayonnaise.

Gabriel Lewit: “Duke’s or die,” he says.

Steve Lewit: Duke’s or die. Okay, we got to look that up. Let’s order some for the office.

Gabriel Lewit: Now, the blade. Okay. You’ve got to have the right blade ideal for spreading condiments. I can’t. All right, last one. Build in layers and mix different textures. Okay. That’s why you got to have a little crunch. 20% crunch, I think he said, maybe, 10% crunch. You could try 15 if you really want. Yeah, make sure your every layer is perfectly… Even for a good crisp bite every time you go. All right, there you have it.

Steve Lewit: They didn’t say how big the sandwich would be. So how big?

Gabriel Lewit: I don’t know.

Steve Lewit: Do you remember Dagwood sandwiches?

Gabriel Lewit: No.

Steve Lewit: Do you know who Dagwood was?

Gabriel Lewit: No.

Steve Lewit: The cartoon character.

Gabriel Lewit: Maybe I’ve heard of it.

Steve Lewit: No. No. So he used to make sandwiches like eight inches high and they’re called Dagwood sandwiches, back in the time. So I used to go home for lunch when I was at school and stuff, and I would make myself a Dagwood sandwich and it would be like six inches thick.

Gabriel Lewit: Not to get… There’s only one last comment. We must move on. But yeah, it’s like when you get those club sandwiches that come and they’re like four… You got the four layers of bread and it’s literally, it’s like half a foot tall. You’re like, “How am I supposed to eat this thing?”

Steve Lewit: You kind of nibble around it.

Gabriel Lewit: I just take my hand, just smash it down.

Steve Lewit: Yeah.

Gabriel Lewit: Okay, well, good luck to your bread making or your sandwich making endeavors. Let us know how it goes. We would also share your tips if you were inclined to send us your tips.

Steve Lewit: We should do a competition in the summer, like a sandwich making competition. Wouldn’t that be fun?

Gabriel Lewit: We’ll see, we’ll see.

Steve Lewit: We’ll see. We’ll see.

Gabriel Lewit: We got to move on.

Steve Lewit: Did you hear how he brushed me off, folks? Just, we’ll see.

Gabriel Lewit: That’s been your thing lately of I’m trying to get to our important last topic here.

Steve Lewit: You brought this topic up. I didn’t bring it up.

Gabriel Lewit: Okay, so to round out today’s show, last time on one of our prior episodes, two or three episodes ago, we talked a little bit about rebalancing. We just wanted to get into a slightly deeper dive here today because it had brought up some questions from folks after the show. We want to just do a little deeper dive into rebalancing, because believe it or not, it’s a little bit more complex under the surface than you may think it otherwise would be. Okay, so just to give you a quick recap, Steve had explained that rebalancing happens, let’s say you had 50% of a hundred thousand or 50,000 in stocks and 50,000 in cash or bonds. Over time, what happens is the stocks tends to outgrow the bonds, and then within a couple of years you might have a 75/25, right? You have 75% stocks, 25% bonds. That’s called portfolio drift. Okay. They drift over time because one outperforms the other. The problem with that is that you could have higher risk then a couple of years later because now you have a 75/25 instead of a 50/50.

Steve Lewit: More money invested in equities, which are greater risk than you originally planned.

Gabriel Lewit: Yeah, so rebalancing is the act of selling what’s done well or better, in this case, the stocks, and buying more of the bonds to get back to that 50 /50 ratio. Okay. Now here’s interesting about rebalancing is there’s a lot of different ways to do it, and for many people it’s, “Well, I’m doing whatever my advisor’s doing.” For others, it’s on autopilot, maybe in their 401k. But for many of you out there, this is an important thing to pay attention to. So we’re going to walk you through the different ways you can rebalance here so you understand some of the differences between them.

Steve Lewit: Cool.

Gabriel Lewit: Sound good?

Steve Lewit: Yeah, it sounds good.

Gabriel Lewit: All right.

Steve Lewit: I’m in.

Gabriel Lewit: Number one, it would be calendar-based rebalancing.

Steve Lewit: Yeah. So some companies will rebalance your portfolio quarterly, some, twice a year, some claim to rebalance every day. Is there a rule, Gabriel, on when to rebalance?

Gabriel Lewit: Generally, no less than annually.

Steve Lewit: No less.

Gabriel Lewit: No less. You should do it at least once a year. If you are trying to stick to a target, for example. That’s obviously the first question. Is this portfolio designed to stick to a target? If yes, generally once a year at minimum. And you could pick the first of the year hence, or the end of the year, hence why this is being discussed right now because it’s a very popular time. Or you might do twice a year, usually year-end and mid-year, very common. And then some will, a little bit further, will do quarterly, where it’s every quarter. And you don’t typically see too many examples of monthly or anything like that, unless it’s something’s purely on autopilot and many of the autopilot rebalancings are daily or on-demand. But those get maybe a little bit more in the weeds than we’re trying to get to here. Calendar-based being point number one here.

Steve Lewit: Okay, I want to go back for just one minute. Why is rebalancing so important other than, okay, now I have a 70/30 instead of 80/20, or vice versa. But in performance, how much additional growth do you get if you rebalance properly?

Gabriel Lewit: Well, there is mixed research on this, but most of the research says that you do see a small, I’m not going to give a specific number here because I don’t have one ready, but a small performance boost over time by rebalancing versus not rebalancing at all.

Steve Lewit: So, I did read some recent statistics on that and they said half a point to a point of growth over a long period of time if you’re doing the rebalancing properly.

Gabriel Lewit: Yeah, well that would be great.

Steve Lewit: That’s very meaningful.

Gabriel Lewit: All right. Now the next type of rebalancing is threshold-based. What do I mean by that? When your portfolio exceeds a certain threshold, out of balance is when you trigger the rebalance. Okay. So in other words, you wait until your portfolio is, if it’s a 50/50 and it gets to a 55/45, you are going to rebalance to a 50/50.

Steve Lewit: Because it’s more than 5% out of balance.

Gabriel Lewit: And that would say if you had a year where for whatever reason when you checked it and it was not over 55/45, then you just wouldn’t rebalance according to that type of approach. So, a little bit less common for individual investors to use because they still have to check it on a schedule to determine if it’s out of balance. And then it’s kind of an interesting one. Yeah. Okay.

Steve Lewit: Yeah, I was just thinking that most individual investors that I know, do not rebalance. They are not-

Gabriel Lewit: Well. Yeah, I think any balancing is generally better for most people than no rebalancing if you have a target portfolio that you’re trying to stick with.

Steve Lewit: Yeah, yeah. Individual do-it-yourself investors usually don’t think that way. They’re just looking for the next, “How much can I make?” Rather than rebalancing?

Gabriel Lewit: The next one I’m going to talk about here is interesting because it’s not market timing per se, but it’s like a close cousin, which would be a economic or market condition driven rebalance. Okay, so what do I mean there? Let’s say all of a sudden the market, you were in a 50/50 and the market went down. Okay.

Steve Lewit: Now 50/50 means 50% equity, 50% bonds.

Gabriel Lewit: Okay, maybe you’re now 75% bonds, 25% stock, which would be pretty extreme. You could rebalance to a 50/50. In some cases, people will swing or shift their rebalancing the other way based on that condition. They might then overweight to stocks after that because they understand that after the market went down that much, there’s a very high probability of a recovery and they may swing the other way to take advantage of that, at the same time they would otherwise rebalance.

Steve Lewit: Yeah, I like to call that leaning. So for example, the U.S. has outperformed international over the past 10 years or so. So it wouldn’t be uncommon to lean your portfolio a little heavier to the U.S. than you would normally do because it’s so outperformed the international markets.

Gabriel Lewit: Yeah, so-

Steve Lewit: It doesn’t mean eliminate the international market, it means lean a little more.

Gabriel Lewit: Yeah, because eliminating is pure market timing leaning or tilting is more probability-based, but still hedging a little bit, right? Now what this one is really starting to look a little bit more like our strategic asset allocation slash rebalancing changes, not just pure rebalancing to a given target. So it is slightly more advanced. And the second version of that is a various life event. So you get married, you get divorced, you have kids, you’re saving for retirement, you’re shifting from cash to retirement savings, you get an inheritance, you just retired. All of these things can trigger, in general, a shifting of your portfolio maybe beyond what its prior target was to an entirely new target.

Steve Lewit: Either more aggressive or less aggressive. It could be either one.

Gabriel Lewit: And so, I think when you have these opportunities where you’re rebalancing and you’re reviewing your plan, it’s a good opportunity to also ask, “Is the target that I’m at still the right target for this goal in this portfolio any way you slice it?”

Steve Lewit: Yeah. And include-

Gabriel Lewit: I’ll say any way you slice it of the bread theme.

Steve Lewit: I knew you… I was going to…

Gabriel Lewit: Because of the sandwich.

Steve Lewit: You stole that from me. I was going to bring it up, put it in a sandwich. So it’s also important not only to have a target of your assets, but a target growth goal for your entire portfolio. So rebalancing and growth goals… Because a lot of people buy stocks or invest in the market and they don’t have a goal. Their goal for their money is to make as much as they can, and that’s really not a goal.

Gabriel Lewit: Yeah, having a goal is very good and you should. That rhymed. Sounds like Dr. Seuss here.

Steve Lewit: Yeah, that wasn’t-

Gabriel Lewit: You knew you would.

Steve Lewit: It’s really not that good.

Gabriel Lewit: All right. But you reminded me, I wanted to say something. What would you do, sir, madam, if you had two accounts, one was a hundred percent stocks with a hundred thousand, the other was a hundred percent bonds with a hundred thousand, and the market goes up versus if you had a single portfolio with a hundred thousand half stocks, a hundred thousand half bonds? One portfolio, same holding, same dollar amounts versus two separate accounts, different dollar amounts, sorry, same dollar amounts, different holdings. You see what I’m saying?

Steve Lewit: No. So I have two accounts instead of one account, but the ratios are the same.

Gabriel Lewit: The ratios are the same.

Steve Lewit: Okay. And the question is…

Gabriel Lewit: How do you approach rebalancing there?

Steve Lewit: I’ll tell you, is this a trick question?

Gabriel Lewit: No, it’s what you were just talking about. It’s called a total allocation approach.

Steve Lewit: Oh, okay.

Gabriel Lewit: If you have a hundred thousand in cash-

Steve Lewit: Very good. I like it.

Gabriel Lewit: I was pointing out that you were smart.

Steve Lewit: That’s right. I just realized that.

Gabriel Lewit: A hundred thousand in cash in one account.

Steve Lewit: This is so good for my ego.

Gabriel Lewit: Or bonds. A hundred thousand in stocks in another account. What do you technically have? You have a 50/50 across your whole portfolio, even though you might view it as, I have a hundred percent stocks and I have a hundred percent bond portfolio.

Steve Lewit: But what’s interesting about that is that if the stock portfolio goes down, let’s say 30%, and the total portfolio is really only 15%, everybody only looks at the stock portfolio and says, I lost 30%.

Gabriel Lewit: Well, it’s an important discussion to talk about what’s called your total portfolio allocation versus a single account allocation. And in some cases, you even want to rebalance not just looking at the individual account, but rebalance across your total portfolio allocation. And we’ve gotten progressively more complex here as we’ve talked about the different levels of rebalancing. But that’s what makes it, I think so darn interesting.

Steve Lewit: If you have a diversified portfolio, not only in subclasses, but in products, you might have structured products in there that have less risk. You might have market products with a lot of risk. You might have annuities with no risk. The real performance of that portfolio is to take the whole pie, not just one piece and say, “How is that doing?”

Gabriel Lewit: Yep. Yep. So that’s called a total portfolio view and/or a total portfolio rebalance.

Steve Lewit: Yes, sir. All right. Good job, man.

Gabriel Lewit: Now go make some sandwiches. We’re done here for today.

Steve Lewit: I’m thinking about lunch.

Gabriel Lewit: If you have any questions at all, give us a call, 847-499-3330 or go to SGLfinancial.com, click contact us or email us info@sglfinancial.com, especially if you have financial questions or terrific sandwich tips.

Steve Lewit: Definitely.

Gabriel Lewit: Have a wonderful rest of your week. We’ll talk to you on the next show.

Steve Lewit: Stay well everybody.

Gabriel Lewit: Bye now.

Steve Lewit: Bye.

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