Podcast Episode - Suze School: What I Want You To Do Now


ETFs, Investing, IRA


April 10, 2022

Listen to Podcast Episode:

On this podcast, Suze recaps this past week in the markets and then we get a Suze School about what Consumer Staples are and why we need to invest in them as a way to have a diversified portfolio.


Podcast Transcript:

April 10,2022. Welcome everybody to Suze School, now I know that I said on Thursday that I was going to talk about I don't remember what I said I was going to talk about, but I don't want to talk about whatever that was. I want to talk about what I'm going to talk to you about now and I want to talk to you about this because this market it has been a very very difficult market and it affects everybody. It affects you if you're in your 401Ks or your TSPS or your 403Bs or your IRAs it affects you if you are an investor and you're looking for income and affects you in every possible way. And this past week was a really rough week for the market. However, I think many of you will remember. If not I'm sure you can just listen to a few podcasts ago where I said I just wanted us all to be careful and wait to see what happens till about April 4th and sure, enough on April 4th I watched, and I watched the markets do relatively okay. But I said okay Suze April 4th this week. What's going to happen this week? Because I really believe that this week would tell the tale. and on April 5th April 6th we got obliterated these markets really showed what they're afraid of and what we should do now why did I want to wait until April 4th because I was totally convinced that after the March meeting of the Feds and where they indicated that they were going to start to raise rates, that a few of the Fed governors would start to show their hands, they would start to possibly get nervous about inflation and maybe indicate what they were going to do even more so than they did in the future. And I figured if they didn't say anything and everything was going along and they didn't really make any recommendations, maybe they would think that inflation could come under control and they wouldn't have to raise interest rates as much and that would be good for the stock market. But that is not what happened. What happened was one of the more I'd say conservative and not a political sense, but with how they feel about raising interest rates. Governors talked about how they felt and as soon as that happened, these markets took a dive. And essentially what was said is we are afraid of inflation; we're going to raise interest rates even more. We want to become more aggressive, probably raising 8.50% the next meeting. And as soon as that got out, you could watch bam. These markets go totally down the drain. So, I watched that and realized, oh, this is here to stay, this is here to stay for a while. So, the question becomes, why does the market go down when interest rates go up and I address this in past podcast. But essentially you just need to know that when the Feds start to raise interest rates, the stock market starts to go down. It's more expensive for companies to borrow money and on and on. But the stock market does not like when interest rates are going up, just know that. So, the true question becomes, what should we do now? But before I tell you what it is that I want you to do, let's look back at a little bit about what we have been doing now. Hopefully you've gotten out of your long-term bond funds or ETFs. I've told you time and time again, I don't like bond funds, especially if they are long term. I don't like bond ETFs especially if they're long term. If you could be into short term bond funds or ETS okay. But intermediate depending on the fund that you're in. Okay. But overall, in a rising interest rate environment, I don't like them. I don't like them. I don't like them if you want individual bonds, I don't have a problem with that because individual bonds have a maturity date. You know, you're going to get back your principal when that bond matures in ETFs and funds. You never know that you are going to get back the money that you put in because it doesn't have a maturity date. I've even said to you, you might want to think about buying two year Treasury Notes with money that you just want safe and sound you know, you're not going to touch you want a higher interest rate then you can get anywhere because right now you can get about 2.5% and you know that they're guaranteed by the United States government and so you might want to look into that. So, I don't mind individual bonds, certain ones obviously. But I do mind bond funds especially if they are long term bond funds or ETF. So hopefully you've gotten out of your long-term bond funds. I started to talk about this a long time ago. We'll see if you did or you did. Hopefully you have gotten into I bonds now. I know all of you think that just because interest rates are going up that the interest rates on, I bonds for the month of May when they set their new interest rate will probably go up. Maybe yes, maybe no. I think it's going to be about a 6.86% reset. But you might want to just watch it and as soon as I know for sure I'll let you know on the podcast and you have until about April 28, to by your I bonds if you're going to and still lock in the current interest rate that I bonds are offering. But I don't have a problem if you buy them right here and right now and just lock in the 7.12% that they're offering obviously it's reset every six months So that's about 3.56%. But for six months it's not bad. And then we see how it resets six months after that. Hopefully you have been dollar cost averaging into the ETF of VTI or VOO or Noble and OBIL especially on days when the markets have gone down or tumble now. So many of you have written in and said but Suze isn't that like timing the stock market? Not really. It was obvious that these markets were going to be absolutely volatile and we were going to have extreme ups extreme downs. And so, if you were going to be investing every month or every so often with smaller amounts of money into these ETFs then don't do it on a day that the market is way up, do it on a day when the market was down now. Was that a calculated guess on my part. Absolutely. But it was pretty much of an educated one. Would I normally recommend that I would not? So I would never say to you wait because there are times when these markets are going to go up up up and they are not going to look back, Remember 2018 when these markets took a tank and then all of a sudden they turned around and bam they went up, up up and then March 30th of 2020 the markets went down and then a little bit they went back up and they didn't turn around until essentially just a little bit ago, but just for about this time, so don't take it forever. Okay, everybody next, it was obvious especially a long time ago that oil was somewhere we should probably be invested. So hopefully you bought Excel E which is an ETF, or you bought Chevron a while ago another little while ago I suggested Devon Energy and hopefully you purchased those and you're just simply holding on for them for now. I know a lot of people have said they think oil has turned over and to get out. I had somebody right into the podcast and again you can always write in and I'm answering more and more questions. By the way if you ask questions via the app. So, if you want to become part of the Women & Money community, just go to Apple Apps or Google Play, download the Women & Money app. Go to where it says ask Suze a question and many of you can attest to the fact that that's where I've been answering many, many questions personally. So, ask your question there or if you don't know how to use apps then go to AskSuzePodcast@Gmail.com submit your question there, maybe I'll answer it. But either way those are the questions that are chosen for the Ask Suze & KT Podcast that we dropped on Thursdays. So, if you want your question answered and KT picks it, that is how you do it. But somebody wrote in a little bit ago and says their financial advisor said it's time to sell Chevron. Chevron is turning over, are you positive about that Financial Advisor? Really? Have you looked at Chevron, did you look at even what they closed at on Friday? Do you see the dividend that they are paying? So, you know, Chevron was up 2.83 points on Friday there at almost $170 a share. They're high for the year was 170 for close to 175 and they're paying you 3.40%. Are you positive about that Financial Advisor? Just same. I personally think given what's happening in Ukraine, the destruction that's going on there. The fight over oil. I think oil could absolutely still go up from here. Time will tell. But in the meantime, you are making such incredible dividends on these ETF and stocks. It's not even funny. However, if you are listening to this and you have not yet purchased Excel E or Devon, or Chevron just hold off for now and let's see where they go. Remember, these were recommendations that were made a long time ago, everybody has profits in it, where it goes from now, if you were to buy it right now is a different story, so let's just hold off purchasing more, but if you already have it, let's just hold on for now. Next we've been doing these things and we've been doing it and we've been doing pretty well however, we need to do one more thing and that is exactly what the market showed me this week actually, it should have shown me this a long time ago but it really drove it home this week. And what we need to do is we need to add another exchange traded fund that exposes us to consumer staple stocks. So, before I tell you what that ETF is and what I want you to do, I want to go to Suze's School here and give you a lesson on what our consumer staples and what are two other categories that work with them. So, you can get an understanding of what you should be looking for, especially during high inflation cycle, especially if you're looking for good interest rates as well. So, what are consumer staples? Consumer staples are things that you have got to have, that the consumer meaning you there are staples that you need in your home, you need food, you need beverages, you need household goods, you need items that are essential and because they are essential, they are a staple in every single home and no matter what inflation does, you have got to buy them. Just because inflation is going up and eggs are more expensive, milk is more expensive, you have got to buy them gasoline, you have got to buy it Chevron, are you understanding consumer staples items that are essential and no matter what happens with interest rates or inflation, you are going to buy the products of the companies that make consumer staple items. This is the area that we are going to focus on. But I want to educate you a little bit more and well what are other kinds of consumer stocks, so you don't confuse anything else with consumer staples. There's another category called consumer discretionary stocks. Now these are goods that you buy but they're not essential. They may be desirable to all of you, but they're not essential. So, you have to know the difference between consumer staple items and items that fall under the category of consumer discretionary, so that you know that you're getting into the right ETF because there are ETF and I want you to do this by the way via in exchange traded fund versus buying individual stocks unless you have a whole lot of money and you could buy like 25 different stocks on your own. But why do that when you can just buy an ETF that does this for you. So, I want you to know that you're getting the right ETF. I also just want to say there is another category and this is a category that really is going to get hit right now. And that is a category called durable goods. And durable goods are items that you buy that are good for the long run. They're durable, they don't expire. You don't use it up. There are items like cars and boats and washing machines and dishwashers and items that you buy that are expected to last for like seven years. Because when inflation hits when the economy starts to go a little wonky, most of you decide you know what I'd rather hold on to my cash then by these things. So, you want your money invested in all different kinds of ways. But you also want your money exposed two things right now that people need to spend their money on. Now. Again, before I get to the ETF, I want you to buy I want to talk about the ETFs that many of you have been buying. Especially the Vanguard Total Stock Market Index Fund as well as the Vanguard Standard and Poor's Index Fund symbol for that is V00, symbol for the total stock market is VTI. The problem with those two ETFs and it's not a big problem. But the problem with that, which is why they have gone down. But listen, they've only gone down for the VTI about 6.35% from the year beginning and VOO has gone down only about 5.19%. But you have been making 1.31% on your money in view, 1.24% on your money. In VTI obviously these interest rates are the dividends that these ETFs have been paying you. However, if you want to switch to VOO, I don't have a problem with that. But you need that exposure. But here is what I want to enlighten you on the top holdings of these two most popular ETFs are identical. The top five or 6 holdings, four VTI are Apple, Microsoft, Google, Tesla, in video Facebook and I could go on. They are identical. The two of them. And those are all stocks that have been hit in video alone, which I love. That stock got hit by 13% this week. These are stocks that are not consumer staples. These are stocks that tend to get hurt when interest rates rise, there will come a time when you absolutely want to be in these stocks because the markets will turn, I don't know when that will be but that will happen and as long as you keep dollar cost averaging into them. Fabulous in the long run. As long as you know, you don't need your money for 5, 7, 10, 15 years or longer you want to keep doing that because the main holdings of these two ETF are extraordinary. Again, you are diversified, and you haven't been hit that bad. Truthfully, and then we have noble symbol NOBL ETF now this is the symbol of the pro share’s Standard and Poor's Dividend Aristocrats. And really the reason that we talked about this ETF, is it is this ETF where they put in Stocks that have had 25 years of dividend growth, some of the best stocks of the Standard and Poor's 500. And those top holdings, those stocks are like archer Daniel Midland Chevron. I'm trying to think of some consolidated Edison, general dynamics, all kinds of stocks that are great. That are very, very different than the stocks that are in VTI and VOO. And if you look at these stocks, I mean truthfully their number one giving you a dividend yield of about 1.94% and they're only down 1.46% on the year. So, do you see that if you diversified among all these things or these ETFs how you really want to have been hurt that badly. However, you also need more diversification. And the reason that I'm telling you this is because I do think inflation is here to stay for a while. I do think the Feds are going to do exactly what they said. They're going to do and they're going to continue to raise interest rates and you need exposure to at least one ETF that takes that into consideration and that ETF the symbol is XLP and XLP is the consumer staples, Select Sector Spider Fund. Now, what are the top holdings in the consumer staples? Select Spider Fund or the ETF XLP Procter and Gamble, Costco, Coca-Cola, Pepsi, are you noticing a trend here? Everybody Philip Morris. What do these companies do they sell you your toothpaste? They sell you things that you drink whether you smoke or not, I don't want to go into that. But it's true Philip Morris is one of them Walmart is part of it, Colgate, Palmolive, Kimberly Clark, General Mills, the Hershey Company. I'm sure there's many more, you can look them up. Those are the ones that come to my mind right now. But listen to the names of those companies, those are all companies that sell you staples that you need? Costco. Yes, you go there what a fabulous stock. Costco has been. Why? Because that is where you go when you need things and you buy them in bulk for less money and again what are you buying? You are buying things that you need, you are buying things that have expired and you have to replace it now just to give you a difference in things is that if you were to look up ETF that had discretionary stocks in it, you would find stocks like amazon Home Depot, McDonald’s, maybe Nike, Lowe's, companies like that. Companies that normally you don't have to go to McDonald’s, you get to go to McDonald’s because you want to go to McDonald’s, it is not a staple but maybe for some of you it is it is not a staple that you need. So, you just have to be careful and make sure that if you're going to do an ETF that is a consumer staple. My favorite one is XLP are the symbols. Now there are other ones out there such as Vanguard, consumer staple fund symbol VDC I think there's one FXG which is like the first trust consumer staple. There was another one by Fidelity. I think the symbol is FSTA but I happen to like for just because I like them XLP so, you might want to think about when you're now contributing to your Roth IRAs or places that you can buy. Exchange Traded Funds, you might want to think about taking some of the money that you were putting towards VTI or VOO or NOBL or even Excel E. Exchange Traded Funds. You might want to think about putting some of that money towards XLP. Alright so just a few stats on XLP It's going to pay you a 2.49% dividend. That's great. Everybody It closed on Friday at about $78, $79 a share. Okay. It's high of the year was about $79 a share and if you had purchased it in January it's up to .55% on the year. So, do you see how if you start to diversify a little bit here when you're down? Not so much with Noble, you're down a little bit more with VOO and VTI you're up with something like ALP. You're obviously up with Excel E. I don't have the exact data on that right now in my head. But you're diversified with different kinds of ETF and really you just can withstand what's happening at this point in time. That's not to say that it's not going to be rough but you're not going to be down 40 or 50 or 80 if you had all tech if you were invested without diversification. So, you need to be diversified in different areas and this is a new area that I want you to add to your portfolio's. Alright. What should we call this Suze's School? I'm going to have to think about that but until Thursday there's really only one thing that I want you to remember when it comes to your money and I want you to be safe, strong, and secure. Now you know what to do. Bye bye.


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