Podcast Episode - Suze School: Knowing What To Invest In, When You Don’t Know What To Invest In


Investing, Podcast, Stock Market, Stocks


October 20, 2024

Suze gives an update on the stock market and why dollar cost averaging is so important, especially when you’re not sure how to invest, or what to invest in.  Plus, Suze reviews some important funds for you to be aware of and so much more.

Listen to Podcast Episode:


Podcast Transcript:

October 20th, 2024. Welcome everybody to the Women and Money podcast. And everybody smart enough to listen. Before I even go on to tell you that today is Suze School, which it is. So get out your Suze notebooks.

It is so important when you hear me say and one smart enough to listen. This is not a podcast that is just for women. It is a podcast for every single person out there.

But it is so important that we understand that women are very, very different in my opinion when it comes to what they do, how they feel, how they think, then men, for instance. So you cannot have in my opinion, a successful financial relationship unless you both understand how you feel about money, how you feel about who you are.

Because it's not just about money. When I talk about money, I am talking about you cause money cannot do anything without you.

And women feel different than men and do things differently and men do things differently. So you have to understand how you both work in order to have a successful relationship, which is what this podcast is also all about. So, it is for all of you, no matter who you are out there.

I just want to make that point because I got an email the other day saying Suze, it's great that you have a Women and Money podcast. But what about us men, don't you think you should do something for us? Men? Well, men, you better understand how the women in your life work, feel and act with money for you to have a successful relationship.

And so there you go. It's for everybody and obviously it's for everybody no matter what your sexual preference is, especially given my situation. All right, everybody.

So many times it seems that a lot of you are seriously confused in terms of you don't know what to do with your money. And even though I've given you individual stocks and investments, you still are confused because maybe you didn't take advantage of it way back when, when I talked about them and you feel like you've missed the boat and you just don't know what to do.

And briefly in a few podcasts ago, I said, listen, just keep investing. If you don't know what to do, you don't want to wait till maybe Keith does come out with his program that he's going to have, if you don't know what to do, just keep investing in index funds. And I want to go back to that at this point in time because I think it's really, really important that you understand, doesn't matter if you could have invested in something that's up 1000% or whatever, what matters is consistency, write that word down, consistency in your investment behaviors, meaning that you do something and you do it all the time, you just don't buy something and you never buy something again.

But you make a plan that you can invest every single month or every three months or whatever it is. But you invest multiple times during a year, month in, months in, month out, months out, whatever it may be, you keep consistent in your investment behavior, which is why truthfully, I like retirement plans at work so much because they're doing it for you. If you have a 401k, a 403B or a TSP every single month. If you're signed up for your employer sponsored plan, you have a specific sum of money taken out of your checks every month and invested in that plan. And hopefully it is a Roth.

You wanna make sure if your company offers a Roth retirement plan, regardless in my opinion of how much income you make, you better take advantage of it, especially. I just have to say this if you're making a lot of money and you no longer qualify for an individual Roth IRA because you're over the modified adjusted gross income limits. Then of course, you want to take advantage of your ROTH in your employer plan because there are no income limits to do that.

So what are you all thinking? But that is a whole another podcast. So you're taking advantage of consistency, month in and month out. But where you all get confused even in your plan is you don't know what to invest in. You look at all the options and you're just totally like, they've given you 20 different choices and you don't know what to do.

I'm gonna be telling you what to do in a second. So just stick with me here.

But a lot of you who do invest on your own, you hear me simply say, buy this, buy that, maybe you're tuning into one podcast and that's the stock that you buy, but you don't do it on a dollar cost averaging basis, which is consistency.

So the other day I was talking to my friend Nicholas and he's about 20 some odd years old now, I think, and I told Nicholas a few stocks to buy because I'm very good friends with his mother and I like him so much. I can't tell you this kid. I also like his brother Alex, but I like them all fabulous kids. And I told Nicholas to buy a specific stock a while ago and the stock happened to be pretty high. It was actually at $240 a share when I told him and I said, but Nicholas, as the stock goes down, you have to buy more. So only invest a little and then as it continues down, if it does go down, you'll put more in it.

Well, that stock did, it continued down to about $140 a share. And so the other day I texted Nicholas because now it's back up to 220. And I was like, Nicholas, how much money now have you made on this stock? And essentially, he said, I didn't, I bought it at 240. And I said, well, why didn't you continue buying it more as it went down? And he said, because I didn't have any more money to invest. That's all I had.

So I gave Nicholas a formula which is a formula for all of you to follow from this point on if you haven't been dollar cost averaging and again, dollar cost averaging is where you take a specific sum of dollars and you invest it month in or every three months into whatever you are investing in.

So I said, all right, here's what we're gonna do from now on Nicholas, let's say you're going to buy something, doesn't matter what you buy, you're gonna buy something and you know that maybe you have $1200 to invest totally. And that's it. You don't have any more than that.

Therefore, when you invest, you are only going to invest $300 of that $1200. You are not gonna buy $1200 worth of whatever you're going to buy, you're gonna buy $300 worth of it. And then three months later, especially if the stock is going down or whenever you see the stock going down, especially if it's going down big, you're going to buy $300 more.

Then a few months later, you're gonna buy $300 more. And then maybe after a year, you will put in the last $300 whether it goes up, whether it goes down, that is how you are going to invest. Because if Nicholas had done that, he actually, rather than being down $20 a share right now, he would be up significantly.

So it's important that you understand, you never just buy number one, 1 stock and nothing else, which I talked about a while ago, but you never put all of your money that you're investing in that one stock at one time.

Now, how do you know when it's time to sell?

You have to ask a question to yourself and many of you who have purchased Devon over the years are writing me and saying, Suze, should I sell Devon, which is an energy company. Should I get out? The dividend has gone down. Number one, I cannot tell you what to do because I do not know your individual situations. I do not know your tax brackets. I do not know anything about you.

Therefore, you need to ask yourself this question if you're even asking me, should you sell? It's because you want to sell because you're not happy.

That's number one, number two, let's say you look at Devon's stock and whatever it's worth right now, you look at the cash value of it and let's just say right now, the cash value of it if you were to sell is $10,000. Ok. Listen to me closely. Now, you are to ask yourself the question. If you didn't own that stock.

If you had $10,000 in cash, you didn't own Devon yet. Would you take that $10,000? And would you buy Devon today?

If the answer to that question is no, I would not. I want you to sell Devon just that simple. If the answer to that question is yes, I would still buy Devon. Then keep what you have. If the answer to that question is, I don't know what I would do, then sell half. You do not have to be what I call all or nothing investors.

If you're out there, let's just say you are because I want to give you an example of dollar cost averaging and I might as well do it with Devon's stock is that, let's just say in June of 2022. It was the first time you heard me say, buy Devon, like the dividend, whatever, buy it.

And let's say that you decided you were going to buy 50 shares every three months. Because back then, if you remember, I told all of you, if you're gonna dollar cost average, let's switch from dollar cost averaging every month to every three months. So let's say from June 2022 all the way till right about now, every three months, you bought 50 shares of Devon. Now during that entire time between now and essentially, then Devon has paid out to you approximately $4176 in dividends. Because whenever you own a stock that pays dividends, it's paying you. So you have to take the fact into consideration that you got money during the years that you owned it.

And over those years, you bought approximately 450 shares for a total cost of about $25,000. Totally. All right. Therefore, your average cost right now in Devon would be about $47.72 once you have minus the $4176 in dividends from your original amount of money that you purchased as I speak to you right now, Devon is about $40 a share.

So in reality, you're not down that much money if you think about it.

So there's a big difference. Do you see, if you simply had bought Devon in June of 22 which was its high at 75. You never purchased it again. After that, you would be down $35 a share, which is 46%. So Devon would have to go up 85% from where it is right now. Just for you to break even.

That is why it is essential that you dollar cost average into something. Because otherwise that's a lot for a stock to have to go up.

Remember when something goes from 100 to 50 right? That's a 50% decline. But to go from 50 back up to 100 is 100% increase.

So when something is going down, you have to participate in its decline. And if you're just holding it and doing nothing, you're gonna find yourself in a situation possibly where maybe you did buy Devon in June of 2022 and you're still holding it.

So, what do you do now? You are to ask yourselves the questions that I just asked you. There are many things out there that if you sold, especially if it is outside of a retirement account, you could take the loss of your taxes, you could do many things with the money that's actually paid higher dividends right now. So just something for you to think about.

All right now, I'm sure you're saying, well, Suze, if I sell, what other stock could I go into if I don't want to buy an index fund? I don't want to buy that. I just want to buy another stock that pays me a really great dividend. I'm starting to think that Whirlpool WHR might be a good investment for dollar cost. Averaging. It's about $107 a share right now because it's paying about a 6.53% dividend yield, which is a fabulous yield. But let me tell you why. And I could be so wrong on this. I can't tell you.

So you're gonna have to do your research and decide if you agree with me or not is that there were thousands and thousands of homes in the past two hurricanes and the floods and the tornadoes and everything that has been happening that have been destroyed and all those appliances within all those homes were also destroyed.

And I personally think, you know what, probably those appliances are going to have to be replaced and when somebody thinks about replacing an appliance or whatever, they usually think about Whirlpool appliances with that type of recognition. So I'm willing to kind of think, you know what, maybe just maybe Whirlpool might be a great place for a good dividend yield.

And if we just have to wait for a while to see what the stock does again, we're being paid to wait. So that's just a thought for you. However, I also want to talk to you about where we are right now in the stock market.

As of last Friday, the Standard and Poor's 500 index closed at its all time high in the entire history of the standard and Poor's 500 index, it closed, the number it closed at and I want you to write these down. So you have comparisons for yourself when you hear these numbers, you know, is it up, is it down? You know, it's all time high now is 5864. The Dow Jones industrial average closed at 43,275.

So, you know what's funny is I will never forget obviously being a financial advisor, stockbroker at Merrill Lynch and the Dow Jones industrial average in 1980 was all over the place. It was like at, I think it started the year at about 800 right in there at the end of the year, we were all so excited because it ended the year. I'll never forget this at about 964. It almost hit 1000. The Dow Jones industrial average. Remember I just told you it was at 43,000 the other day when it closed.

And what was so fascinating is that we are like, come on, come on, come on. And then there it was in really early in 1981 where it broke 1000 several times and then it retreated and things like that. But then it started to increase and increase and increase. But we were all so excited as if, oh my God. Can you believe it's going into four digits? And I'll never forget reading this book. I forget by the name of who it was. That one day, the Dow Jones Industrial Average was gonna be 25,000. And I'm like, yeah, and I'll buy you a bridge and here we are at 43,000, the NASDAQ closed at 18,483. And just for curiosity's sake, the 10 year Treasury was at 4.073%. And Bitcoin is at 68,418.

So why am I telling you this? Because it's really, really important that you understand the differences between all of these indexes? So you kind of understand where you should be investing, especially in your 401k. So let's just do a very brief education. And what are the differences? Because I tell you these indexes are at that and you're, I'm sure thinking, well, what's in those indexes? Why are there so many different indexes?

And therefore, what does Suze want me to know about those indexes? So I'm gonna tell you right now. So again, the Dow Jones Industrial Average simply consist of 30 large publicly owned companies. Now, even though I know that its name is the Dow Jones Industrial Average, it no longer just includes industrial companies, right. So in order to be listed in there, the companies are selected and based on their reputation, their sustained growth, all this kind of stuff. So that is an index that's made up of only 30 large publicly owned companies. Now, I stress that because 30 companies doesn't necessarily say a whole lot about the entire stock market.

So a more popular index today, in my opinion is the Standard and Poor's 500 Index and that index tracks 500 of the largest US companies. So 500 companies sounds like a lot, right, everybody. But that's only about 75% of all the stocks that are listed on the US stock market.

All right, especially in terms of the value of the entire stock market for a company to be listed on the Standard and Poor's 500 Index. Those companies again have to obviously meet certain criteria and they have to be based in the United States and they have to have a market cap. So what is their company work? What is the market capitalization of their company? And it has to exceed $18 billion. So the companies on the Standard and Poor's 500 Index are large companies and they also have to demonstrate the fact that they can have positive earnings over specific times that they are good quality stocks.

The NASDAQ is an index that really includes about 2500 companies that are listed on the NASDAQ stock exchange and they're heavily weighted towards technology companies. All right, everybody, you just need to know that. Also, I'm just gonna throw this in for you.

There is another index called the Russell 2000 index which tracks 2000 small cap, meaning they're very small us companies. Now, what's important for you to know is how have these indexes done if you had simply invested in the index and simply the index, how would you have done over this past year?

So if you simply invested in the Standard and Poor's 500 Index, you would be up approximately 23%. The Dow Jones Industrial Average, you'd be up about 14.8%. The NASDAQ, you would be up about 23.2%. And the Russell index, by the way, if you happen to invest in that, you'd be up 12.3%.

So what's important again, going back to the beginning of this podcast, which is if you've missed in the individual stocks that have been named over the past year or whatever you want. More diversification, as I've said it over and over again.

There is nothing wrong with simply dollar cost averaging in to an index fund or ETF just that simple, everybody, I mean, who in the world would be upset with the return of approximately 23% now. Yes, I know. Maybe you could have just bought NVIDIA, maybe you could have bought something else and you'd be up 1000% or whatever.

But when you are buying individual stocks, I personally believe you need serious guidance. What to buy when to buy it all of those things. So it's important that if you don't have that guidance, if you don't know what to do that, you simply look at indexes next question.

All right, Suze, so which index would you buy now? Very recently, I did a comparison for all of you. And just again, so, you know, I like exchange traded funds more than I like mutual funds. If you're in a retirement account, all you can do is buy, most likely mutual funds don't have a problem with that.

But outside of retirement accounts, I like exchange traded funds that trade like stocks on the stock market, you can buy and sell them any time versus a mutual fund that can only be bought or sold at the end of business for the market that day. So just so, you know, so I did this in depth comparison between the ETF VOO - VOO, which is the Vanguard Standard and Poor's 500 ETF and the Spider S and P 500 ETF symbol SPY.

And if you go back, you can listen to it. And my conclusion was I liked VOO - VOO better than the SPY. It's just a little better. It's not a big deal. If you're invested in the spy ETF fine versus VOO, don't have a problem with that.

But VOO comes out just a little tiny bit ahead, like 1/10 of a percent. Then the Standard and Poor's 500 ETF. So a lot of you then wrote in and you said, all right, Suze, for years, you've been saying to buy the Vanguard Total Stock market index, the symbol VTI versus anything else. And one of the reasons I was telling you that is because the Vanguard US Total Stock Market Index covers 100% of the stock market.

So let's just briefly talk about the difference between the two and their returns. So just follow along again, I just said VTI holds approximately 3500 stocks which includes small mid and large cap companies. VOO holds approximately 500 stocks simply focusing on large cap companies.

So VTI is going to offer you broader market exposure than VOO. However, VOO has slightly outperformed VTI really over many different time periods. So let's just go back 10 years. VOO's average annual return is 12.61% versus VTI is 12.07%.

So essentially VOO has outperformed VTI by about 0.53% annually since 2014, I could go on and on with it. But if you have to pick one or the other, then I would have to go with VOO. Now, I do think there is absolutely nothing wrong with any of those ETFs whether they're VIT, VOO, whether it's QQQ, what, whatever it may be, the point of the matter here is, you have got to be involved in investing in the stock markets at this point in time, whether they're going up more, whether they start to go down, whatever it is over, the majority of the time markets tend to go up more than they tend to go down.

Therefore, I want you to be dollar cost averaging and diversifying your money in index funds or index ETFs if you can't buy ETFs because you're in a retirement account and be involved in this market and don't be upset if you're not in individual stocks that maybe I named or I mentioned or whatever because again, I truly believe if you're going to be buying individual stocks, you need professional guidance because you have to know a whole lot about those individual stocks.

And if you don't have that guidance, I rather see you truthfully in an index fund because making 15% a year or 12% a year or whatever it may be or even more is far better than making a few percent in your money market account or anything else.

Obviously, for safe money, you wanna lock in certificates of deposits. I still like the interest rates at Alliant Credit Union. You might want to go to my alliant.com and check it out if you live in a high state income tax brackets, be looking at 3, 5 and seven year treasuries don't have a problem with you locking that in. And for those of you who do want to lock in a little higher interest rate, I don't have a problem with you doing small amounts in the 30 year treasury bond.

All right. So that was quite the Suze school for today.

So, until Thursday, when KT and I will be back with another KT and Suze anything. There's only one thing that I want you to remember when it comes to your money and it is this people first, then money, then things.

And if you do that, you stay educated, you listen to a podcast like this over and over and over again. So you understand what I am trying to teach you. So you then become powerful enough to control your own destiny, then I promise you you will be unstoppable.

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