Podcast Episode - Investing: Don’t Try to Outsmart The Markets Like I Did

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In this episode, Suze tells us a cautionary tale about a recent market watching experience she had and how it was the wrong thing to do.  Plus, why you need to pay close attention to who your beneficiaries are.

Podcast Transcript:

November 14th, 2021 and guess what? We are back. Well actually were not back, I'm back because today is Sunday, which is normally Suze school, but KT will be back on Thursday for ask Suze and KT anything. So many of you wrote in and said, what did you do? What did you do over this time? I have to tell you the truth. We didn't do anything. We just took a break from everything and do you know how much I loved looking at my calendar and seen absolutely nothing there, no zoom calls, no conference calls, no talks, no appointments, nothing. I loved that so much, I can't even tell you. We still got up at the same time every morning we usually get up at 4:30 or 5. That didn't change, but just to have a break from having to do anything was so incredible. I can't even tell you. So, we are very happy however, to be back as we missed all of you. Now, before I begin, I just have to say next Sunday, November 21st. Guess what? We will be announcing the winners of the Alliant Credit Union sweepstakes and hopefully we will have them on the air with me. Maybe if not on Sunday, I'll have one at a time over the next few weeks just so you can hear their reaction when I call them to talk to them. But anyway, it's just something that you might want to tune in and just participate in. All right now, today's podcast is a little bit different because it's about me, although it's always about m. But I'm calling this podcast investing, don't try to outsmart the markets because that's what I tried to do. So, I just want to tell you the mistake that I recently made so that you don't make that mistake as well. But before then I just want to talk about Medicare and how this is open enrollment and the one thing that I noticed the entire time that KT and I took, you know, some time off that whenever I turned on the TV to watch anything, no matter what channel it was on, there was some celebrity, some pro sports person talking about, depending on your zip code. Do you want to save money? Do you want to have to have you know Medicare give you a check back? All this stuff and pitching you heavily to call this number. That was on the screen to hear about Medicare and how you can save money. Now, it was about a year ago, right now, right around November 15th a year ago, that I did a podcast where I talked about it. The entire podcast and why I don't like Medicare advantage and that by the way is what all of these commercials are trying to get you to do. They are trying to get you to switch from Medicare if you're in Medicare or before you sign up for straight Medicare, to choose Medicare advantage. So, just listen to that podcast as to why I don't like Medicare advantage. However, with that said I just want you to think about this common sense wise. Why are all of these insurance companies paying all of these celebrities all of this money, all of this expense to put these ads on television almost 24 hours a day to save you money. Is it going to save you money or is it going to make them a whole lot more money in the long run? Why are they doing that over and over and over again? I just ask you to think about that. So, with that said I'll leave that topic for you to decide what you should or should not do. So, let's go on now to Suze School and something that I really don't want you to do and what I don't want you to do is to do what I did. And let me tell you what that was. So, quite a few months ago as all of you know I started to talk about Bitcoin I started to talk about Cryptocurrency and even though I kept saying don't invest in it, unless you have money to lose. I still hopefully got across the message that this was an investment that if you were going to make it that you would hold it for the long run. Don't be a trader. Don't sell it, don't do this. I mean I even told my niece that my niece Katie. Yeah and it was like but it's something that all of you should start looking into. So, besides Bitcoin which is the mother of all cryptocurrencies and if it is something that you do want to start looking into cryptocurrencies, I would tell you to start with Bitcoin. I just would, because if anything succeeds it will be in my opinion Bitcoin. So besides putting a little bit of money in Coinbase and a little bit of money in Paypal to start buying Bitcoin and things like that. As time went on, I started to get interested in other cryptocurrencies and I decided to open up an account at FTX, which is an incredible trading platform for many crypto currencies. And what I started to do and I may have even told you all this in past podcast I started to invest in this Cryptocurrency and every time it would go up, I would invest more money and it would go up and I would invest more money because I like investing when things are going up even more than when things are going down. So, by the time it was over I had invested $50,000 in this Cryptocurrency and it allowed me to purchase 499 coins with an average price of $100 a coin. So, you might want to write that down. I invested $50,000. I was able to buy 499 coins over the time I was investing, which gave me an average price on these coins of about $100 a coin. And I did that with the intention of keeping this coin forever and ever and ever, in the hopes that it would go up and up and up and to really not look at it again. But in a very short period of time, I was looking at it, my mistake, and I noticed that it was going from you know 100 to 130. It went all the way up to $210 a coin which meant that my $50,000 investment was worth about $102,000 right in there. And I was like, oh my God, I just doubled my money. That is so incredible. And I would tell people about it and they would say sell sell sell and KT would say sell, sell sell and really nobody knew what to do because you know it was a relatively new little coin out there and there we are and I'm confused is what to do. But I figured no, I'll just wait a little and then it started to drop, and then it went down and down and down and finally when it got to $138 a coin, I couldn't take it anymore and I sold. I still felt great about it because I had $69,000 and I invested only $50,000. But what I wasn't thinking about at that point in time were the tax ramifications for doing so. Remember when you buy an investment outside of your retirement account, and you don't hold it for at least one year or longer, if you sell it, you are going to have to pay ordinary income taxes on it. If you wait for one year or longer, then you get to pay capital gains tax on it. So, in this case, even though I did quite well I invested $50,000, I now have $69,000. I have a $19,000 profit. But in my tax bracket that would mean that I owe taxes on that $19,000 and it would cost me about $7,600. Which really therefore made my profit after taxes $11,400. Now that's still not bad. That's about a 22% gain on my original investment. But now I had $69,000 and here was the problem. I still wanted to own this cryptocurrency. Remember I wanted to own it for the long run, and I thought that I was being smart and I would sell it here at $138 a coin. It would go all the way back down again and I would buy it again and then just do this all over now. What's important? Let me put a pin in this for one second. What's important when it comes to investing is if you invest in something and you're not planning to keep it for the long run, you just want to get in and you want to get out and you don't plan to ever buy it back. Okay, no problem. You can do it as much as you want because that was your plan. But if you have a plan to own something for the long run like I did, then what I just did was a serious mistake and I'm going to show you why in a second and something you should never do. So, what happened because I still want to own this coin because I think in the long run it's going to go way up. Is that I started to watch it all the time and it started to go from $138 up to $140 up to 145 up to 150. And before you knew it was at 185 and I couldn't take it anymore, because I wanted to be in this coin. So, I now took the $69,000 and I put it totally into this coin, but because the price of the coin was now $185. My $69,000 only bought me 372 coins versus originally my $50,000 bought me 499 coins and this is where the lesson starts to take hold. What happened after that, is that this coin started to go up and up and up and before I knew it, it was at $252 a coin. Now my $69,000 was now worth $96,000. But here's the lesson that I learned, if I had just kept everything like it was: my $50,000 because I had 499 coins vs the 372 that I now really have. I would have had a $128,000 versus $96,000 and that is a $32,000 difference and that's just at $252 a coin. Now obviously I'm not selling the coin, I've learned my lesson because I didn't buy it to go to $252 I bought it for it to be 1,000, 5,000. I mean just this week last week Bitcoin did hit almost $70,000. And I remember when Bitcoin was just a few $100s. I remember when people tried to get me to buy Bitcoin at $5,000. So, I bought this for it to go up and up and up. So, I'm not selling it here. But if I hadn't made the mistake of selling an investment that I wanted to own, simply because I was afraid to lose my profit in the long run, I would have made so much more money if it continues to go up, even if it goes all the way back down again and then goes all the way back up again even higher. I still would have made out so much better. So, it's really the number of coins that you have or the number of shares that you have in an investment that you really like that will ultimately determine how much money, actual money you get to make. So, this was an important lesson for me because I'll never do that again. Nothing wrong, like I said before, if you're buying something to buy it, ride it up, sell it and never buy it again. Okay, no problem. But it doesn't make sense to buy something, watch it go up, sell it, pay taxes on it, especially ordinary income taxes. Hope that it goes back down and then buy it again. It doesn't make sense because if it doesn't work out that way, you're paying taxes when you don't need to pay taxes and you literally aren't getting as big a bang for your bucks as you could. Now, did that just make sense to all of you? So, it's really important that investing, don't try to outsmart the market, be an investor, don't be a trader. It never really, for the majority of people, works out. The next thing I want to talk about is this. Who you have left your money to in your retirement accounts really matters. It really matters. And let me tell you why. And this story also has a little bit to do with making an investment and not touching it. The other day I got a call from my friend John and John is a financial advisor and John said Suze, I want to tell you the strangest story. So, I said okay boyfriend, let me hear it. And he said you know, years ago there was a woman who used to work for our firm, and her husband had died left her about $1 million in retirement accounts and things like that. So, we took it and invested it at the time in all these fabulous stocks in Google, in Facebook, in Amazon and Apple, all these stocks, Suze and you know we would always have lunch at least once a month. And then all of a sudden, I stopped hearing from her and that was so strange because even though she wasn't working at the firm anymore, she had retired, we were keeping in touch and I just, you know, I couldn't get her anymore. So, this went on for a number of years and I kept calling her, I would get her message machine but she never would call me back. And so finally after years of this I just couldn't take it anymore. So, I looked at her IRA, and the beneficiary of her IRA was her nephew and his phone number was there and everything. So, I called the nephew and I said can you tell me is your Aunt okay? I've been trying to get her now for a long time and she's not returning my calls and he said to me, Suze, how would I know? How would I have any idea? I've never talked to her. I don't really care about her. So, I have no idea where she is and what she's doing. So, don't bother calling me again. And the reason that John called me was because of this, the account that this woman had because she made really good investments and never touched the money and it was in good quality stocks and she had a financial advisor watching it for her. Even though she didn't return his calls, she obviously must have been getting her monthly statements. The money was now worth $7 million. Can you imagine that $7 million dollars and she left it to a nephew that could care less about her. Now put a pin in that again for one second. It is really important that you understand how vital this money is, what money can do in this world for organizations and nonprofits and people who really are so unfortunate with the things that have happened to them. Money is this incredible tool that can help people be more, have more. It's really important that we think about who we are leaving our money too. And for me to hear John tell me what this nephew said about his Aunt. I'm sitting there thinking and she's leaving him $7 million and he could care less about her. Like he could say to John, let me check on her. I don't know why she hasn't, you know, called you back or whatever. He just said, I don't really care about her. Now, it is not our position to talk to this woman about where she's leaving her money. That's not what our job is as financial advisors. But my job for all of you is for you to really think about number one to check all the beneficiaries on your retirement accounts and make sure that that money is going to somebody who's going to appreciate it, appreciates you and really understands the gift that you're about to give them. I know a lot of you think, well I should just leave it to my relatives. It's, you know, I don't know where else to leave it to. I'll just leave it to them even though I don't really know them or whatever. I'm telling you look into nonprofits, look at places that can really benefit. I've said this before, KT and I are leaving at least 90% of our estate to nonprofits, to hospitals, to research, to all kinds of places that I know will really use this money when the time comes to help others who are so less fortunate. But the other lesson of this story was what happens when you simply leave your money alone? As long as it's invested in good quality stocks and you're not selling it because it went up 50%, and now what are you going to do with it? And you just stay invested for the long run again, as long as it's in good quality stocks, you're paying attention to. That's how amazing wealth, really amazing wealth can be built. The good news about this story is that John the other day did call this woman again as he's been trying to forever. And this time she picked up the phone, and she was so happy to hear from John, she was totally healthy. She's 94 right now. And John said, why didn't you ever call me back? I left a message on your answering machine over and over again. She said, I don't know how to work that answering machine. I never check it. It just goes into voicemail and wherever it goes. I don't even know what it does, but I don't know about it. And John went, oh and he said, do you need any of this money? Do you know that you have $7 million here right now. She goes no, I don’t really need any of it I live on my social security check and I just I don't need anything else, but what I have. John so wanted to tell her about her nephew. But again, that's not our place to do so. So, the reason for the two stories on Suze school today are very simple. If your intention is to invest, invest, don't trade. If you're in good quality stocks or mutual funds or whatever, just stay in them. Just that simple. And if you're new to investing and you want to be investing now with that goal in mind, just dollar cost average every single month into a good no load mutual fund or a good exchange traded fund. My favorite exchange traded fund is the Vanguard Total stock market index fund. So, you can just do that, be totally diversified and all will be well. All right, one other thing that I do want to talk about and that's inflation, what's so very very sad is what's happening with inflation. Which means that most of you will be spending anywhere from 10% to 20% to 50% more for items that you are buying this year than you did last year. If you're going to buy a used car, you may spend 30% more for it. Gasoline and certain other things gas at the pump could be up 50% from where it was a year ago. And you have to really take a look at how this is impacting your spending because what's happening right now and it's very sad is that the savings rate that was at about 32% in February of a year and so ago where all of you were saving so much money. You're now spending more money than you ever have and you're not only spending it because you happen to have saved it because there was nothing for you to spend money on, almost a year or so ago. You're spending it because you have this urge to go out and eat, to go to these venues, to have fun and I do not blame you but you have to be very, very careful here because you are spending far more money to do the exact same things that you possibly were doing before the pandemic hit. So, you need to just think about that. All right, maybe you bought a house but is now the time for you to renovate that house when lumber is so high when everything costs so much more? Maybe you should wait. But the reason that I'm also talking about inflation here is that a little while ago, I think it was June maybe the June 15th podcast where I started to talk about Series I bonds and Series I bonds are inflation bonds, and currently if you buy them right now their interest rate that they're giving you for this year anyway will be about 7.12% and it will depend on what happens with inflation as years go on. A lot of you have been writing me and wanting me to talk about Treasury inflation protection securities known as TIPS. So next Sunday, along with the winners from Alliant Credit Union and who knows what else I'll talk about at that time. I want to talk to you about the difference between TIPS and series I bonds and when should you buy one vs. when should you buy the other? What are the pros of one versus another? What are the cons of one versus the other? So that you can really understand. And the sad part about it is I was watching tv over the past week, week and a half. Nobody, all these financial people, nobody is really talking about Series I bonds or TIPS. They're just not doing it. Not exactly sure why they should be, but they're not. So, for those of you who don't know everything you need to know about Series I bonds. Go back to I believe it's the June 15th podcast and listen to it and learn about what I tell you about it. You can also go to treasurydirect.gov and do some reading about Series I bonds as well as Treasury inflation protection securities because next Sunday I want to talk to you about them in great detail. Alright, everybody that's about it. So again, the name of the podcast is investing, don't try to outsmart the markets like I did. Ah ah, never ever again. So, until Thursday, I really only want one thing for all of you. And as that is for you to be safe, be strong and be secure. See you then. Bye, bye now.

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