ETFs, Interest Rates, Investing, Mortgage Rates, Stock Market
May 16, 2021
Listen to Podcast Episode:
On this podcast, we go to Suze School on what to expect in the stock market, so you can invest wisely for the long term. Plus, lessons on mortgage rates and what real estate to take advantage of.
May 16, 2021. Alright, don't be too disappointed. It's just me today and the reason that it's me today is a few reasons, but mainly because we're going to go to Suze school on kind of a serious topic such as the stock market, mortgage rates, Bitcoin and pensions versus lump sums. But also, because KT's little sister has come to Florida, which is where we are and she hasn't seen her in over a year, year and a half and it's going to be her 60th birthday. So, KT is spending time right now with her little sister, Barbara Travis. So that's where she is and here I am, left to do the podcast. It actually kind of makes me happy. But anyway, that is besides the point, before we start, I just want to say a few things. Number one, our really good friend, Jennifer Littlehells. Her birthday is on the 18th of May. She's going to be 50. So, Jennifer from KT and myself, Happy, happy, happy birthday. We hope so much that you like the little present that we sent you. Also, I just want to say something about the Alliant Credit Union offer. You know, it's very important that you understand that if you open up an account at Alliant Credit Union, you need to fund it within one month to be able to take advantage of the ultimate opportunity savings account, which is where you put in at least $100 a month for 12 consecutive months. And at the end of that time, you will be given $100 which is equivalent to a 16.7% return on your money. And if you pass that up, you are just crazy. I don't have anything else to say about that because there's nowhere, anywhere that you can get that kind of return. But you have to fund your accounts people if you don't intend to, don't even bother trying to set one up. But I just want to say that and once again for the three-step reset course that you're all loving. To get it, all you have to do is go to suzeorman.com/hope and that is where you will be able to purchase it. Also, one more thing on June 8th on Today's Hoda and Jenna on the 10 a.m. hour, that is going to be fabulous. You know why? Because I'm going to be on it live and you really should tune in because we have a lot of surprises for all of you. But mainly we're also going to be doing a, Can I Afford it segment? So, if you would like me to be able to tell you if you can afford it or not, can you simply send an email into firstname.lastname@example.org and just say yes, I would like to be part of that and be on live with you, Hoda and Jenna. All right, that's everything. Now, let's start truthfully, today's podcast and I want to start with the stock market. How you feeling? Are you just going crazy This last week was a crazy week up 400 points down five or 600 points at 1.7. It's all over the place. Now, I know, I know, I told you that starting probably April 5th this market might start a low-down trends, start to go down for the next year or two, little by little, and that maybe you should consider selling if you need your money within a year or so. But if you don't just continue to dollar cost average. On the whole, was I right? Was I wrong? I don't even care. But it is true that many of the stocks did start to trend down big time. While many of the other stocks did not, I'll get to that in a second. I still think long term we could very easily trend down. So, you have to be careful here everybody. Also, you have to have the courage if you are invested in individual stocks and you are still holding some of those individual stocks, do you have what it takes to buy more as these stocks go down? Or are you an investor that is better off simply doing an exchange traded fund or an indexed mutual fund? Now, I just want to show you the comparison between what would have happened to your portfolio if you simply took the passive investing route, which so many people are saying you shouldn't be doing that. Index fund investing is absolutely over, the best way that you should be doing this is to be buying slices of individual stocks, get into stocks that are really, really moving up. So, I just want you to listen to me for a second over the years now that I've been doing this, not just on the women and money podcast as well as the men smart enough to listen. Throughout my entire career, I've been saying to you, you know, if you really don't know what to do, why not just buy the vanguard total stock market index ETF or fund or the Spiders 500 index or the Standard and Poor's 500 aristocrats. Which is a dividend paying ETF. And why not just do that and not worry about it, if you had purchased and I'm going to use the symbols here. The aristocrats ETF symbol NOBL, Vanguard total stock market ETF. Which buys the entire stock market symbol VTI or even the standard and Poor's 500 index symbol SPY. And you purchased it at its very top very top. Today, given all the fluctuations and everything, you would only be down 1.8% hardly anything. And in the meantime, you would be earning a dividend because those ETFs pay about 1, 1.5, sometimes 2% in dividend yield. So, you essentially would be at this point in time even but you probably didn't buy it at the top of the market, you probably bought it a while ago. So, you are really still up. But then there are those of you who know you wanted to buy individual stocks and you bought stocks like Zoom and Uber and Airbnb and Teladoc and things like that. Where you stand today, if you purchase those at the top of the market, you would be down at least 35% right now, 35% or more today. And that is a big deal. One of my favorite stocks, Teladoc and it's still one on my favorite stocks is down 55% from its high. There are stocks like Quantum Scape, which was a darling of a stock that's down 80% or 90% from its high. Now, here is the question for you. Do you have what it takes when stocks are down significantly and they may continue to go down? They absolutely may. Do you have what it takes to buy here? Do you? Do you have what it takes to buy when they go down even more? Are you the type of investor that only likes to buy when the stock market or individual stocks are really going up and up and up? Because that's what you want to be a part of? Or are you an investor that really understands that's not necessarily where you should be investing at that point, that you want these markets to come down. How many times have I said to you, you should be wishing and praying and hoping that the market goes down because when the market goes down, especially if you don't need your money for another 10, 15, 20 years or more. Why do you want these markets to go up? Are you crazy? It's almost like real estate if you're going to buy a home. Do you really want the real estate market? The homes you want to purchase to continue to go up and up and up? You do not. In fact, I'm sure many of you are wishing, why can't they just go down so I could finally buy and get into the real estate market? Well, I have to tell you, you should be thinking the same way with the stock market. I want you to think back to 2009, when most of the stocks that were out there, the standard and poor's 500 index, everything. They were down almost 50% from the high and many of you were absolutely so afraid to buy at that time. No, I don't want to be in the market. No, everybody got absolutely financially slaughtered in the market. If you had purchased back then at the low or even around then over the next 14 or 15 years, you could have averaged about 14% on your money, even with the market having gone down where it's gone down now. But no, you decided to stay out and I don't want you to necessarily make that same mistake. So, if you are an investor who is buying individual stocks, you need at least 15-25 individual stocks. So, you have true diversification. You should be dollar cost averaging into these stocks as they go down. Or just purchase something and then just ride it out right here. Especially when you have stocks that are down 80%, 55%, whatever it may be, that are absolutely fabulous companies. On the other hand, if that's not, you, you don't have what it takes to do that. You might want to think about sticking within indexed funds for now. You just might want to think about that and continue to dollar cost average into your Vanguards and your Standard and poor's 500 indexes and your aristocrat or dividend paying things like that. All right, Everybody, I want to talk about another ETF, and one that I recommended. And I have to tell you I still do by the name of Arc Innovation Fund, symbol is what ARKK. And it is down 35% from its high. Why am I still liking this? Because if you don't have what it takes to go in and pick right here, individual stocks that had been zooming and now that they're down. You want a fund that isn't just invested in the standard and poor's 500 index or all over. If you really want stocks that are for the future that are here to disrupt things, meaning that they're really invested in the way things are going to be 5 or 10 years from now where many of the stocks that are on the market today might not even be in favor anymore because of how technology and robotics and artificial intelligence, how that is changing everything and you want to be a part of that. But you are afraid now, you're afraid to buy Teladoc by yourself right here or even if it goes down further. Then what you are looking for in my opinion, is a portfolio manager who can do that for you and you simply buy an exchange traded fun where they are buying all the stocks that they have serious research on and serious reasons as to why they are buying it. I am going to stick by the head of Arc Innovation, a woman by the name of Kathy Woods, who did so incredibly well over the past few years. But recently her funds have gotten hit just like all the individual technology stocks and innovation stocks and stocks that were in such in favor. I mean even look at Zoom, everybody wanted to own Zoom. Zoom is down 47% from its high. So, I still believe if you don't have what it takes to do it on your own, then just buy and exchange traded fund like ARKK and put some money in dollar cost average into it. You know, I don't have a problem with that at all. But should you put all of your money into ETF, like that? No, there's nothing wrong with you continuing to put 80% or 90% of your money right now into the standard and poor's 500 index or vanguard or whatever it may be and maybe 10 or 20% of your money into something like an ARKK. For some diversification there. I just want you to think about it. So many of you buy at the wrong time, sell at the wrong time and when things are going down like this, rather than being upset that you see your portfolio value or your 401k statement, you're down a whole lot of money, possibly, and then you freeze and you don't do anything. This is the time you should be dollar cost averaging. Again, I still think we could have more downside risks to come. I don't know if we do or don't, but I do know if you have time on your side, you absolutely should be dollar cost averaging into these markets and really kind of wishing and hoping that for now anyway, these stocks or the market continues to go down. Again, if you have money, especially in a retirement account. Did I not say this and you need that money within a year or less? I don't know, didn't I say to somebody just a little bit ago who had $1 million, who was retiring in a retirement account, I would be taking the money out and I will stick by that advice. Especially if you need that money. Now the question becomes, if you need that money, what do you need it for? You probably need it to generate income for yourself. And there's all kinds of ways for you to generate income for yourself, whether it's with an income annuity or by buying individual dividend paying stocks or whatever it may be. But just be careful how you are invested. And for myself, I don't know, I think the bond market is broken. I'm not exactly sure I would be invested in bonds at this point in time, if you aren't invested in them already. I just don't think so, especially a bond fund. That's what I think about the stock market. Learn the lessons as to what happened in 2009 because what goes up actually does come down and what goes down eventually will come up. All of you, I just want to say one more thing. If you are purchasing anything in the stock market, your minimum holding period should be five years. If you're not going to hold something for at least five years and you're not going to be able to diversify. You might want to think about not doing it at all. I want to talk now about real estate, but more about real estate itself because I already gave you a Suze school on real estate a few weeks ago. I do think real estate will continue to go, for the reasons that I said on that podcast a little bit ago. But I really want to talk about mortgages and the interest rates on mortgages. All right, everybody because I do have an opinion on them. But then again, I have an opinion on many things and I know I'm speaking quickly today, but that is because I really want to get in Bitcoins and other cryptocurrencies as well as pensions versus lump sum distributions. And I really don't have that much time left. All right, mortgages, now while it is true that interest rates on mortgages are really low right now, the truth is you are having a purchase far more of a house in terms of cost then you did just a year or two ago. So, the low interest rates on mortgages, is not necessarily what you should be looking at. What you should be looking at is the cost of the home, and can you really afford it even with these low interest rates? Just something to think about number one. Number two, just like the stock market, you do not want housing to continue to appreciate at 12% or 20% because that is not normal and shortly it will out price everybody and it's just not something that you want. You really wanted to return to a normal appreciation of about 5%. And if it can do that then real estate will continue to appreciate for really quite some time in my opinion. But when it comes to mortgage rates, here's what I want you to think about. Right now, we are experiencing inflation like we haven't seen in a long time. I want you to think about inflation and interest rates as if they're like railroad tracks, what one does the other does. But the leader is inflation, if inflation goes up, interest rates go up, it's just that simple. And given that inflation is absolutely going up, I mean look at what it's costing you to buy food, to get a gallon of gasoline, whatever it may be, then interest rates will go up, which means mortgage rates also will go up. So, I expect that this summer you probably will see interest rates on mortgages in particular, go up maybe a half a percent or a percent. You should not be rushing to refinance right now, that's not the point of this. But you should just know that that is not the time that you should be buying real estate when you see that happened, even though it might have a little effect on how quickly real estate is selling. So, I wouldn't be necessarily going out and rushing to refinance right here and right now, because I do believe that after this summer it is probable that you are going to see interest rates start to come down again because I think inflation might even turn into deflation and therefore everything will start to come down again. And that probably will be the time and it might be the all-time low of mortgage rates. That would be the time, in my opinion to refinance. Again, in terms of real estate, you might see a little slow down, but I actually don't think you're going to see anything really with real estate until probably 2023, right in there. So, we'll just have to see. Also, I want to say this the trend now in real estate, if you are looking to invest in real estate, in my opinion is multi-family homes. Yes, flippant fixers, they're all relative as well. Also, areas in the country where real estate, the homes are 50 years of age and they're really outdated and they need to be torn down. That might be a great place as well. But multi-family housing is something you might want to look into because I think as time progresses you are going to see more families start to live together. You might want your parents to live with you, your kids might not even know what to do, so they may move in with you. It's just something again I want you to think about. I could go into great detail as to why inflation is going up right now and why I think it's going down. But basically, you know you just have to listen to that because it's exactly what is happening next. Bitcoin now. Bitcoin is very interesting because it is down 23% from its high as I'm recording this. It's around in the high $40,000s down from $65,000. But for the first time we have another Cryptocurrency, Ethereum that's starting to actually show more appreciation than Bitcoin and a lot of that reason is, a lot more developers are working on Ethereum and the way that Ethereum can be used which is a little bit different than Bitcoin. Just something for you to think about. I am not telling you to invest in a Ethereum. Um it's just something to take note now, Ethereum is also down from its high of about 4177 to about 3883. But what we really have to start looking at, is how are these cryptocurrencies used and the amount of energy especially Bitcoin takes to mine them. The other thing that I found interesting is that I didn't like what I consider the manipulation of this on some level when you have Elon Musk coming out and saying we're no longer going to take Bitcoin for Tesla. And that is the day that you see Bitcoin drop considerably. I don't know what I think about that. I mean that alone should not be making Bitcoin move up or down. But then again is that what made it move up because one or two people said I'm buying Bitcoin and I'm putting billions of dollars into it. So, as I've said to you before I do think certain cryptocurrencies do you know that there's over 9,000 cryptocurrencies right now. A few of them will emerge as the leaders most likely Bitcoin, Ethereum maybe one or 2 others. But any money that you put into any of these cryptocurrencies as I have said so many times, you better be prepared to lose all of it because regulation can start at any time and you really just need to understand that. I just want to talk for a second about Dogecoin or however you say it, which is you know it is at $0.52 right now down from .74 cents. So that's a 27% decline. But once again when Elon went on to Saturday Night live and he was saying whatever he was saying about it and all of a sudden, it drops considerably the very next day I think I dropped 45%. There's just something again, that I do not like about that. I also want you to be very, very careful about the stories that people are telling you. The other day, the woman who colors my hair was over at the house color in my hair to say it needed, it was putting it mildly. And she was telling me this story about how her sister-in-law told her that somebody put $8,000 into Dogecoin and it is now worth $80 million. So, she really wanted to get involved. How can she do that? And I explained to her, you have to not listen to these stories that people are telling you. First of all, it is impossible, even if you bought $8,000 worth of Dogecoin at the very bottom, which I think was like three cents, you know for a coin and it was at the top at 74 cents for one, it would be just a few $100,000 at most. Not $80 million. So, can you just be careful of the stories that everybody is telling you last but not least. Am I taking you on a worldwind here? Oh you betcha, I am. Last but not least is many of you as you are either being asked to retire or you are retiring or your company is asking you to choose. Do you want a lump sum for your pension that you can roll over or do you want it in a monthly income? And a lot of you are confused. I just want to remind you of what has gone on with the stock market. There is something about when you know that you are getting a secure income and it's coming in every single month to you no matter what and no matter what the stock market is doing, that is really worth its weight in gold. Remember everybody, the goal of money is for you to be secure. And sometimes the markets, up and down, everybody talking Bitcoin this, real estate up and, it can drive you crazy because you're like I missed out. Oh my God I did, and then it's like oh thank God I'm not part of it. But I want you to know who you are. I want you to know your temperament. I want you to know you're investing emotional quotient, so to speak. That, are you freaked out when you see that the markets are down 700 points? Do you feel like you have been on a roller coaster? I just want you to take note of that. And if you are one of these people that will be offered the choice between a lump sum of money that you can roll over to an IRA or whatever it may be and you invest it yourself or you get a pension. What is key in making that decision is, how you feel right now in these kinds of markets that are full of turmoil. So just take note of that everybody. All right. How is that? That was a lot that we just covered. But really, really important, and one of the great things about this podcast and all podcast truthfully is you can play them again and again and again and really get out of the podcast, what I want you to get out of it. I just want you to be intelligent with every move that you make with your money and I hope this podcast has helped you do that. So, until Thursday when Mrs Travis will return with ask Suze and KT anything. I just want you to stay safe, see you Thursday.
Take advantage of the Ultimate Opportunity Savings Account with Alliant Credit Union by clicking here!
Join Suze’s Women & Money Community for FREE and ASK SUZE your questions which may just end up on her podcast!
To ask Suze a question, download by following one of these links:
Credit & Debt, Saving, Investing, Retirement