Podcast Episode - Suze School: Let’s Get Things Straight

In this episode, Suze clarifies some of the misconceptions listeners may have about her stock recommendations and breaks down the difference between qualified and non-qualified dividends.  Plus, she explains more about REITs and where you should hold them.  Suze also shares her current outlook on the stock market, and more.

Listen to Podcast Episode:

Podcast Transcript:

Suze Orman: Welcome everybody to the Women and Money podcast, as well as everybody smart enough to listen. Suze O here and today is Suze School. But before I begin Suze School, I just want to say a few things.

A lot of you out there have never joined the Women and Money Community app, and I'm just gonna tell you now you're missing out on a lot.

What do I mean by a lot? Very simple. I go on there quite often. Like this week, I went on and made an announcement about Bitcoin. Don't be surprised to see it do this and go all the way up, and I give you some thoughts. I do things that I don't necessarily do on the podcast, so you might just want to check out by going to Apple Apps or Google Play and check out the Women and Money Community app. It's free.

And go to the wall and you never know what you will find there. Also, if you have a question that you want answered on the Women and Money podcast, if KT chooses it, please send your question to asksuzepodcast@gmail.com. That is the best way for KT to see it and also make sure you visit and subscribe to my YouTube channel, that's youtube.com/suzeorman.

All right, are you ready to start Suze School? Get out your little Suze notebooks. The theme of today's Suze School is very simple: It's "let's get things straight."

All of you hear me say something on this podcast, and you all go bazooy and you think that because I didn't say this or I'm saying that you all seem to take it, not all but many of you seem to take it the wrong way. Let me give you an example.

Last Sunday I mentioned quite a few stocks that I like. All right, I've been mentioning stocks that I like on this podcast now for almost four years. And therefore just because I did not mention them last Sunday, you think I don't like them any more and you couldn't be more wrong if you tried.

I tell you when I don't like a stock. I tell you if I've made a mistake or I feel like I did, and I think you should sell. I tell you that. If you haven't heard me say that, then chances are you probably shouldn't be selling it. So it's important that you know I still like the stocks that I mentioned maybe two weeks ago or three weeks ago. And just cause I didn't mention them on Sunday doesn't mean I don't like them. OK, that is number one.

The next thing I want us to all get straight is this. A week or two ago I did a podcast comparing income from a treasury which is taxed to you as ordinary income versus a dividend paying stock that has qualified dividends. And a stock that has qualified dividends—you only pay capital gains tax on that stock dividend. Big difference between ordinary income.

So I did this comparison for everybody, and I thought, oh well, that was a nice little Suze School for that day. Then I started to get emails. Suze, what's the difference between a qualified and a non-qualified dividend?

Well, a non-qualified dividend means you're going to pay ordinary income tax on it, everybody. Again, a qualified dividend, you are going to pay capital gains tax on it. Just that simple.

Well, in the past I have recommended an REIT Care Trust CTRE as well as Realty Income symbol O, and both of them have done extremely well and gave you great income. However, they are an REIT, and by the way, an REIT is a real estate investment trust.

Now the emails are coming in and saying, Suze, why are my dividends for my REITs non-qualified and I have to pay ordinary income tax on it. All right, listen to me, everybody.

Real estate investment trusts, all their dividends are non-qualified because of how REITs are structured and taxed. So REITs don't pay corporate tax. REITs are simply passed through entities and to maintain the status and avoid paying corporate taxes, they are required to distribute at least 90% of their taxable income to shareholders. Just that simple.

Listen, their dividends come from rental income, right? That's what a real estate investment trust is. They get income from rents. And therefore rents are not considered qualified corporate earnings. You know, dividends from a regular C corp or something—those are qualified. But rents are not considered qualified corporate earnings, so the IRS doesn't treat that income as qualified dividends.

Again, for a dividend to be qualified, it must be paid by a US corporation or obviously a qualified foreign company from after-tax profits. Just that simple. So since REITs don't pay corporate tax, the dividend doesn't meet the standard.

So if you have an REIT—and I was going to talk about this today, but I may be talking now obviously about other things—REIT should be held, if you can, where? In your retirement accounts.

So whenever you have a stock that's paying you a high dividend or a bond or whatever and it's not a qualified dividend, it's non-qualified, hold them in your retirement accounts if you can. Just that simple. But the majority of REITs are non-qualified dividends, and now hopefully you understand that.

Now, a lot of you want to know, why do I still think that the stock market, especially the Standard and Poor's 500, is going to go up and up and up? And it's a very simple answer, everybody: it's because we currently have more than we have ever had before—$7.4 trillion—sitting on the sidelines. $7.4 trillion. That is a whole lot of money.

And it has been sitting there and sitting there just waiting for the stock market to go down so they can maybe go into it or we'll see what happens with interest rates or they've just been waiting. And therefore they have been watching these markets go up and up and up.

So what will make them want to go into the market? Well, maybe rate cuts. Maybe J Powell will reduce the Fed funds rate and then interest rates will go down, and then people will stop getting these higher rates that they're getting, and then they'll put them back in the stock market. Or they'll continue to watch stocks like NVIDIA, which hit for a little bit the $4 trillion mark.

So when I say it hit the $4 trillion mark, I am referring to the company's market capitalization. It's called the value of the stock or the market cap of the stock, and what this means is that you take the price of the stock, what it's currently trading at, and you times it by the total number of shares that are owned. Just that simple. And that is the market cap.

So for a short period of time there, NVIDIA's price stock times all the number of shares out there added up to $4 trillion. All right, now why does that matter? It matters because investors as a whole are willing to pay that kind of money for the stock at these current prices, so really it's not overvalued when you look at it that way.

Now remember it's not that NVIDIA has $4 trillion of cash in the bank, no. It's simply their market capitalization. So when a lot of these stocks keep being in the news—just regular news, everybody—it starts to pique people's interest. And before you know it, they see it go higher and higher, and that's exactly what's happening with Bitcoin, by the way. And then they want to start participating in it.

You know I'm talking about this—by any chance, do all of you remember what was the first company that ever hit $1 trillion of market capitalization? Do you remember who that was? That was Apple Computer, believe it or not, all the way back August 2nd of 2018.

Here we are seven years later and they're at $3.3 trillion of market capitalization. What's so interesting about it is that, all right, it took them 7 years to get to 3.3 trillion. NVIDIA first hit 1 trillion in May of 2023. Two years later, essentially, they're 4 times that amount of money at 4 trillion.

Stocks like NVIDIA are growing so fast it's not even funny. They have just trounced all the other stocks that hit $1 trillion and continued to grow. Like you have Amazon. It took them 5 years to be at $2.4 trillion from 1 trillion. Microsoft, it took them, I think, 6 years to reach 3.7 trillion from a trillion.

So you have stocks like NVIDIA, which is why we love NVIDIA—that is growing so fast it's not even funny. And what's interesting is that the other day I got a text from Phyllis Shelton. Do you all know Phyllis? Phyllis Shelton is, in my opinion, the world's expert on long-term care. And she has helped so many of you, and if you simply go to the Women in Money app and look in one of those little square boxes, look for long-term care, and you will find the information of how to contact her—just that easy.

But she wrote me the other day and she said, Suze, the fact that Microsoft is laying off so many people and everything like that, is that good for Microsoft or is that bad? And I wrote her back and I said to her, Do you know that Microsoft has reduced their expenses, so a true reduction by reducing their workforce, but by AI as well, and it has saved them $500 million. So it's possible that AI may also be adding to the bottom line of many of these companies.

So there are companies that you want to be involved with. You just do—on a dollar cost averaging basis. Just remember for August and September it's usually their worst months. OK, just saying.

The next thing is you're writing me and you're saying, but what about the tariffs? What about them? Well, that's a good question, everybody. What about them? It seems like we're all still trying to figure out, are they going to cause inflation? Are they not? Are they going to contribute to stagflation? Are they not? Or are we getting so used to them being on, being off, being on, being off that we're really not paying attention to them at all anymore.

And that OK, President Trump announces that he's going to slap a 35% tariff on Canada and all these things again. And so Friday the markets go down. But I'm sure in the next few days you'll be seeing next week the market's going right back up again unless he comes out with another announcement. So I would not be paying a lot of attention right now to that.

I would be more paying attention to when the market goes down, what a great time to dollar cost average into many of the stocks that have been mentioned on the Women and Money podcast. Just that simple.

Now if you had been on the Women and Money Community app the other day when Bitcoin was at about $108,000, I posted, don't be shocked to see it go straight through 110 all the way up to 140—it could happen pretty quickly. And right now it's around $117,000 of Bitcoin.

Now Bitcoin may be going up again because it's becoming more and more part of the fabric of people in terms of they're comfortable with it. They don't even need to understand it. All they need to see is it's going up in value. People are making money. And again, the way that I like to invest in Bitcoin is through an ETF, IBIT. I think last week when I mentioned it, it was at 62. It's now at 67. So those are nice moves. First time I mentioned it to you, I think it was at 52. So again, those are nice moves.

Now would you make more money if you just did the Bitcoin directly? Yeah, you would. But I'm not still that comfortable in doing so. So in my own way, I just like the ETF. So these are things that you really need to know and think about.

Next, I know everybody wants to know what stock should you be holding in a retirement account versus a regular investment account. Now it depends how much money you are investing because remember retirement accounts have limitations as to how much you can put in there.

But your true stocks that you think you are going to hold for a long time—that will give you tremendous growth such as many of the AI's and the semi stocks and things like that and the ETFs like SMH—if you can, I would put those in my retirement account. Because if you want to sell when they have doubled or tripled, you don't owe taxes on it when it's in an investment account.

Some of us get trapped because things have gone up so much in value that you don't want to sell because if you sold right now you would owe too much in taxes—whether it's ordinary income tax or a capital gains tax—it kind of prevents you from selling when you do want to sell.

REITs should be in retirement accounts if you need income, however. Then you have to decide because you can hold certain income vehicles obviously in retirement accounts like treasuries and CDs and things like that. And especially if it's in a Roth retirement account, then all of a sudden you're getting that income within the Roth retirement account and you're not paying taxes on it. And when you take it out, guess what—in most cases, if it's been in there for the right amount of time, you're of age, it's all tax free.

So a lot of those stocks and treasuries and things, if you don't need it right away, might be really great to just compound in retirement accounts if you can. Municipal bonds cannot be held in a retirement account, so that's something that would just be held where? In a regular investment account.

If you have dividend paying stocks that are qualified dividends and maybe you've maxed out your Roth retirement accounts, then hold them in an investment account. But I will always tell you—if you can—you really high velocity stocks that you expect to go fast and up in retirement accounts. Those stocks that are more slow movers, index ETFs, things like that, hey, I don't have a problem with you keeping those where? In an investment account. So that's just a quick synopsis for you.

All right, that was Suze School for today. I just wanted to make sure before we go on to other topics that you get things straight right now because otherwise you're all confusing yourselves. Right, and you're making mistakes.

All right, everybody. So until Thursday when Miss Travis joins us again, there's only one thing that I want you to remember when it comes to your money, and it is this: You are to make your money, make more money. That is what the Women and Money podcast is all about.

Now what am I going to do for the rest of this day? I cannot wait to go and watch the finals of Wimbledon. Who do I want to win? Boy, I like them both so much. They're just gonna have to show me who wants it more.

All right, everybody, take care. Bye bye.