5 Mistakes Investors with $2M+ Make | Ep. 27

This podcast is for informational purposes only and does not provide personalized investment, financial, legal, or tax advice. Jerker Wealth is an investment advisor registered with the SEC. Registration does not imply any specific level of skill or training. All investing involves risk, including possible loss of principle. Listener should consult with a financial advisor before making any financial decisions. 90% of investment performance is based on asset allocation, 90% plus. In my experience quantity or we might even say complexity doesn't always equal valuable. We want to capture the market's full-weighted return over the longest time period possible. I'm a do the easiest thing that's going to produce the most for me. Yeah, just probably one of the main reasons I have at Flossy. Welcome to today's episode Beyond the First Million. I'm your host, Gideon Drucker, alongside my colleague, Jordan Haines. And we've spoken often about how I go into just tunnel vision, editing, working, Jordan is talking to the production team to bridge it, everybody. How you know we are a group of older millennials is we just had a 20-minute conversation about Harry Potter, the new casting, the old casting, assessing if they did a good job with nine-year-old children into a television series. And I was fully engaged and part of the entire conversation, which is what it takes to get me out of my scripting vortex as talking about Harry Potter. They need to be able to visualize this right here is in the middle of a room. And there's all sorts of things happening around here. And normally Gideon's brooding in the corner, like just thinking about the next episode while we talk about. I don't know, that's the definition of the word brooding, by the way. Is that being productive on my own? But it's usually hovering. Today, you were fully engaged in the conversation. I've been telling my nephew, Bodie, Bodie's 5, and Levi is 3.5. So I usually use Bodie's short hand, just because he's like the first to be able to do things. But I can't wait to read Harry Potter to them. And my brother never got into Harry Potter. My sister did belatedly. So I've just like, I think I, at Bodie's birth, I was like, I am reading Harry Potter when he gets to a certain age. He's going to be 5. He's not there yet. We, I told him yesterday, we're going to replace Kerry. We're throwing out Curious George and we're bringing in Harry Potter. I have read 8,000 pages of Curious George in the last year or two. Not bad, but it's not Harry Potter. So your oldest is eight. Is that two? I don't know enough of that. He said, well, it just depends on the reading level, but they have the books on tape that you can listen to. And we were talking about the theatrical release. And I'm not, I'm not a big fan. I like the old school. Who's the guy who narrated the old ones? He's my favorite. That's just what I think of. And you want to read too. We put it on because we have Alexa at our house. We just put it on Audible and Alexa. And some of my son can say play Harry Potter and we'll just start reading it. And he follows it. Like that age is a good age to get somebody into it. Yeah. Would six be too early? I don't know. Interesting. We'll come back. We'll have an answer for that in the next episode. I'm sure my sister will tell me what book we can read together. Although I have to say, so he's super in the Marvel. Yeah. And my dad, Papa is just the traditional grandpa of like, nothing's too old for him. Of course, he can follow. So they were watching Black Panther. And my sister was like, it's too old for him. There's too much violence. Like he's, she's like, I don't, I just don't think he's going to enjoy it. But he's like, no, I really want to watch. And that's like, yeah, come on, he can watch. I was with them. And they get to the scene when the main character Tachal gets stabbed. And like in his back, it's bloody, it's violent, hysterical crying. And my dad, all right, I guess I called that one wrong. I was off there and Bodhi goes running out of the room crying into my sister's arms. But she's like, yeah, maybe she'll listen to me on that one. So Black Panther, we have to wait. Maybe Harry Potter. I don't know. So today's episode, the five investment mistakes, investors with $2 million plus make. And I like the idea that I'm going to keep throwing out the five things of this, the four things of that and then paid no attention to how many numbers we are actually going through. So there might be five, there might be seven, but they're all going to be super important. I can promise that. So both of us have received investment statements, probably hundreds, it's not thousands of investment statements over the years. And you do this long enough and you look at different portfolios long enough. And you can kind of, you immediately look at it and you need to do the full analysis to make a team will look at operating expenses and beta and alpha and standard deviation and all that. But also within five minutes, we can look at a series of holdings and really get a sense of, all right, how did they get here? Why do they own what they own? Do they know what they know? If they have an advisor, a lot of times we can say, okay, we know that advisor did this or we wouldn't have done that. But you just, you see enough that you can look at. And as I was thinking about that in charting this episode, we wanted to lay out, well, all right, here are the five or six things that we see day in and day out when we're looking at investment portfolios that can be corrected. That are over complicating, making it too expensive, that are essentially giving up returns that the clients should want to keep inside of their portfolio. So before we get into the mistakes that people make and what we see, we have to start with the investment framework we want. You can only identify gaps or issues if you know what you are trying to get to what you're trying to accomplish. So we've spent individual episodes talking about our investment framework and then explaining them and showing the numbers. So I do recommend going to those investment specific episodes for more of the why we invest like this and how the data and history kind of support the approach that we're going to get into. But we're still going to get into it. We're just going to be brief. So our investment framework, we believe in owning 100% equity portfolio, meaning 100% in the stock market for folks that have a 10 year plus time horizon when investing, which really describes all of our clients. So we believe clients should have really the bulk of if not the entire component of their investment portfolio in the stock market. Now the obvious caveat that every client is different, it has to be matched to your investment capacity, how you think about money, how much risk you're comfortable with. But really how we like to think about is we want to get you as close to 100% in equities as long as you can stick with that portfolio because the best portfolio to own is one that you can actually stick with in down markets and up markets when different sectors are up for a 30 year time horizon. So you need to be able to love with it. But assuming you can, yeah, we believe that owning the stock market in favor of any other asset, fixed income and bonds, cash, high old savings, CDs, money markets, anything else is going to lead to the greatest returns over time. Now, once we get from that fundamental equity portfolio, we believe in owning low cost, globally diversified index portfolios, meaning and we've talked about this, we are passive investors, we're not day trading, we're not stock picking, we want to own the entire stock market, large cap, small cap, international emerging markets, growth and value tech, all of it inside of the portfolio because we don't know what sector is going to do best. We don't know when international is going to outperform the US or vice versa. So we want to own the entire makeup and our role, we want to capture the markets full-weighted return over the longest time period possible. And the way to do that is historically is to own passive funds. Why do I say historically and what am I even comparing, like what is the benchmark we're using, is this is instead of using actively managed mutual funds. And I'm going to explain this for a minute because it's going to get into some of the critiques we have later on, active mutual funds are funds that portfolio managers at the fund family are picking the stocks and bonds that are going into the fund that you're going to own. Now, because they are actively picking the stocks and bonds, they typically have higher expense ratios, meaning it's more expensive to own them as compared to the Vanguard S&P 500 because nobody is picking what goes into the Vanguard S&P 500. It is the 500 largest companies in America at any given time is inside of the Vanguard S&P VOO, so the costs are lower. So mutual funds have higher operating expenses and they're typically more expensive because mutual funds have to pay out capital gains throughout the year. So even if you haven't bought and sold the mutual fund, but if the mutual fund itself has bought and sold stocks, you are responsible for those capital gains. So they're typically less tax efficient. Now, none of these two things would matter being tax inefficient and having higher expenses if they materially outperform their passive equivalents, but they don't. Historically speaking, actively managed funds have not performed any better than index funds. And one of my favorite stats to this effect is if you look at the highest performing mutual funds over a five-year period, the top 25%, and then look at how did they do the next five-year period? They're typically towards the bottom, which means it was random. They're not just better funds that are always at the top, it ebbs and flows, and really there haven't been many consistent mutual funds that have outperformed the indexes they are matched up against. So our feeling is keep costs low, be tax efficient, and know that we're aiming to capture the market's full-weighted return, historically 7% net of inflation, and that's how we want to build out your investment program. Throw a water at me. Wait, I'm going on, when I'm going on too long. Sometimes I need to be shut up. No, no, we're going to get the mistakes in a second, but I think you set the stage nicely. We do see a lot of investment statements. There's two things that I want everyone to keep in mind. One is, we're assuming we know the person, and then the other one is all the things that you said, we have an opinion or a philosophy on how we think about investing, and you did a really good job at explaining those. As I was saying, you needed to throw a water on it, shut me up. When Billy Madison is answering the question in front of the whole school, and it's about economics, and he does like a minute and a half, and then he blacks like, "Ah, I don't know what happened," and he's like, "He falls down the wisdom that came out of him was so great that he couldn't even stand up anymore." The industrial revolution to me is just like a story I know called the puppy who lost his way. That is how I felt delivering that, so every now and then you just need to tackle me or do something so we move on. You said a word that is I wanted to double click on. This is our philosophy. We are passive investors, and I believe that. It's how all of my own money is invested, I would never invest differently for myself than our clients, and we fundamentally believe that. Somebody is not going to not reach their financial goals or not even reach their investment goals. If they decide, they want to own active managed funds instead of passive. I think they could do it more efficiently, but as long As long as you have a framework, you have a philosophy, you have an intentionality around the way you invest. And if you have an advisor that they have one, we believe in passive overactive. But I would rather an advisor say, "Hey, I believe in active mutual funds and here's what we use," rather than somebody that doesn't really have an opinion either way or doesn't have a framework or a way of helping you understand what you should own. I think that's important. Part of why we like passive investing is not just the actual mechanics, which is its lower cost and it's more tax-efficient, but it also helps clients understand what they own every single day because index funds, passive portfolios, are generally just named for the index that they own. So if you want a Vanguard small cap fund, it's generally Vanguard small cap index or the Russell 2000, which means you own the Russell 2000, which are the 2000 smallest companies in America. And when a client looks at their investment portfolio, even when the market is down, they look at and say, "Okay, so I own small cap international," they say, "Okay, I understand what I own, why I own it. There's no obfuscation, there's no I own the Golden Eagle fund of America. Some of these mutual funds have very extravagant names that don't tell you anything about what you actually own. If you're an investor and the market goes down, you want to immediately understand what do I have? I've always felt some of these mutual funds that are named for something really cool, but don't tell you anything. It's like they're hiding one level behind. And again, this isn't a reason to not own it, but the more clear, transparent, I would want our clients to be able to explain to their friend, not that they would do this, but explain the investments they have and why they own it in a minute. I would hate for them to be like, "Yeah, my advisor, I don't really have any idea. We don't need them to have a 30 minute podcast about it, but for them to at least be able to explain it." And I have found passive investment vehicles allow you to better understand what you own, make up of everything without a level of it being hidden behind something. I've said, I think many times on this podcast, I'm a little bit type A, I'm just like paranoid is the wrong way. I always want to make sure I'm not being taken advantage of or that someone's trying to get one over on me. I don't know, maybe that's from the military where everybody is always trying to get one over on you in every way, shape or form, but I'll check my tax return five times. If I sign a contract, I'm going to read it. If vendor has an invoice, I will take the time, maybe it'll take me a few days, but I will look at it and go through everything. And with index funds, there's something, and I'm talking about this really, if I were the client, and I had an advisor managing, there's something about index funds that are so clear and transparent of I can live with if the market goes down 20% and my portfolio goes down 20%. I'm not going to be that, yeah, the market went down, the economy is whatever. It happens, it's expected, we're planning for that. I can live with going down with the market and all of our clients can, they've shown that. What I wouldn't be able to sleep with and this idea of like I'm missing something, somebody's getting one over on me is the market's flat and I'm down 10% or the market's up 15% and I'm at three, like these wide variances to the market as a whole. And when you own index funds, there is no variance. What the market delivers is what you're getting. And to me, both as an advisor with the job and responsibility of managing other people's money, but also the way I would want to, it's just, I don't want there to be any surprises. I don't want my performance to veer quite frankly in either direction, that much from what is supposed to happen based on what's going on. Because to me, that is the scariest thing for somebody managing your money is you wake up and oh my god, what happened, I can't believe it's gone. The market will go down and you will look at your accounts the way we manage money to say, holy shit, we lost 30%. But you'll know it's because everybody lost 30%. The market went down and there's just, I don't know if I explained that fantastically but there's just something comforting to me about that way of managing money. Do you feel that? I know you came to us with a similar investment philosophy. How do you feel like when you're responsible for managing clients assets? Obviously, it's part of the trucker wealth approach, but when you are the person responsible for explaining all of this to your clients? Yeah, probably one of the main reasons I have that philosophy. I've never had that perspective or really, that's not, I don't think that's a common perspective where you're just described, but I really like that as like, when you look at these index, ETF mutual funds, these things that are tracking the market or an index, it's fully transparent. You know exactly what's happening because everyone else is happening to us. Nobody's buying something in your portfolio that they're not buying for somebody else, they're buying something because they got a good lead into it. Nope, we own the entire market, we're going to focus on your taxes, on your cash flow, on everything else. I actually like how you frame that. How do you do the least amount of, I don't say work, but the least amount of risk that you have to take, the least amount to get to the most amount of, the 80/20 rule is exactly what we're talking about. All right. So with that as our baseline, our foundation of how we set up a canton, by the way, a passive approach, you can taxless harvest, you can direct index, you can do covered calls to generate a little bit of income. When you hold, there are, it doesn't mean we don't want to get more proactive or more efficient when the opportunities present itself, but we do so on the top of a passive approach, which is the key we're going for here. So all right. The problems we see for somebody that has $2 million plus, and some of these, their problems regardless of how much you have, some of them it is actually intentional that we're saying that, and we'll highlight when that's the case. So $2.5 million, and let's say seven different accounts, husband and wife, they have two Roth IRAs, they have a $5.29 for their kid, they each have a $4.1K, and somebody has a rollover IRA from a previous job. Number one, too many overlapping positions. These will look at a portfolio, and it goes 15 pages deep with 80 mutual funds, and sometimes just for fun, I'll look at it and go, they have nine large cap funds. And clients say, well, yeah, super diversified, or based from what their advisor said, well, I'm super diversified. Look at how many funds I have. To which we explain, well, these nine funds have the exact same stocks inside up. So you own Apple in nine different funds that doesn't make you more diversified than if you just added up the ways you own Apple across the nine funds and put it into one fund, you would be equally diversified. Because diversified, who cares about the wrapper, the mutual fund, the index fund, it's in it. What is the underlying holdings? We like talking about maintaining a five to seven index fund portfolio. Sometimes we'll use custom indexing if it's a taxable account, but in those five to seven funds, we own 2,000, 3,000 plus companies in a balanced diversified way. If you don't need 75 funds, you don't need 15 or 20 funds to be diversified. Now you can say, well, sure, and maybe that's inefficient. What's the problem? Two things. One, I would say the problem, and this might be more behavioral or even the looks of it. So this is really if you have an advisor and you have nine funds of the same style. So you have nine large cap funds. Whether it's truly damaging for you or not, my first question will be, well, you have a professional advisor. Do they have a philosophy? And they have a framework, is there a reason you own all these funds? Are they out of bank? And then there's a, it highlights something that there's something in the process that is flawed. In my opinion, even if maybe so far it hasn't created an issue or a cost, although generally it is. You just want to see it. Yeah. So that's the first reason. It's a little cosmetic, but it's, well, if you have an advisor that has an investment philosophy of framework and way of managing money, the fact that they own the same securities in the same way nine times over just doesn't make sense. So we would want to be aware of that, we would want to watch for that. But also the more different funds you have, the more complexity for no value, you're just asking for there to be more issues across the board. You're asking for there to be more cash drag, or you look at it and you think you're diversified. And this is the big one. But you have 85% of your portfolio in the S&P 500 and a huge proponderance of that is intact. Well, no, I'm diversified. I have these 37 funds. Yeah, but most of them own the exact same thing. So you're actually as concentrated in the S&P as if you literally just own the S&P 500 with one fund for 85% of your portfolio. Yeah. In my experience, quantity or we might even say complexity doesn't always equal valuable. And it usually is the opposite. It's usually like compensating for a lack of value by just adding stuff. There's a weight to over-engineering life in a lot of different areas. And especially as a relates to investment, you might have five of these different companies S&P 500 fund. They're all doing the same thing. That's the reason. Well, they're all doing the same thing. Why do I need to have five of them? Let's just simplify it to one. I think what you're saying is let's bring this rather than there's good in having 20 different funds. And let's say it's actually just fine if we have seven funds in here. And that's okay. You're going to get to the same end point, the same return profile as that same immigration, but just condensed. And again, it tells you something about the philosophy. Now, we have a lot of clients that have never had an advisor and they come to us with the same type of story and individual stocks and we're not beating them up about it. And I do want to be clear, I don't look at that portfolio and go, holy shit, their investment for Julio is never going to get them where they want to get to. No, it will. They ultimately own the market. They have their money and equities and 90% of investment performance is based on asset allocation, 90% plus, which means the amount you are choosing in stocks versus cash is going to drive the majority of the portfolio. So I always, and I'd say this with clients, sometimes when we get deep in the weeds on their investment portfolio, I say, hey, we're going to spend the money. In the next 30 minutes, kind of critiquing and issue spotting within your portfolio, because that's the meeting we're on. But I don't want you to mistake and think that what I'm about to say is like, you can't retire. You can't send your kids to college or like, you're not going to end up with money. We're taking the time to get deep in the weeds, but we don't want you to lose sight of the creative perspective, which is you're doing most of this thing, right? Even in this example, they're doing most of it right by having their money in equity diversified mutual funds. They have a few extra means they're not as optimized, but it's not something to cry about. Like, we can fix things a bit, but we are talking on the margins, and I always like giving clients a sense of scale. So we're not sometimes advises like set or whatever. for your base selling them. Oh my God, if you look at that, that's horrible. You're gonna, no, we're not saying that, but we're just trying to help you get a little bit smarter along the way. - Your money's invested, good job. Before you move on to the next mistake, it's kind of a misunderstanding of diversification, oftentimes is what this is, like I've had clients where they're like, oh yeah, we've got 20 funds in here. And I think they think diversification is holding a lot of different mutual funds or a lot of different investments. That's not always what it means. Diversification is being diversified in investments that represent different allocations or different sectors or things like that. That's what you want. - Yeah, and the best definition of diversification is not owning enough of any one thing to make a killing from it or to get killed by it. And when we say one thing, start at the security level. Do I own too much of any one company stock and then take it to the next step? Do I own too much of a sector? Oh, I own too much of tech or AI within tech or I own too much in utilities. I don't think anybody's really said that 'cause they're a very small part of the S&P 500 right now, but do I have an investment thesis? This is the opposite of diversification is when you have, you're investing in a way that you will do really well if something happens and really bad if anything else happens. And that is how we want to think about diversification. But you're right. And that's why mutual funds have no significance to diversification because it's based on the underlying holdings and any mutual fund can hone any combination of things. So part of our job is helping clients understand, well, what do you actually own? But if you own these five mutual funds, what stocks do you own? And sometimes I like taking it down to what companies are you invested in, right? When somebody goes to Walmart, do you make more money? When somebody watches the latest Apple show, do you make more money? And again, to the point of transparency, when you just own mutual funds, you kind of have no idea when you strip it down to the index or down to the security level, you understand, oh, I'm investing in these companies that I frequent every day. Number two, wow, we're only at number two. All right, that's a joke. We have pretty much touched on all these throughout. So we'll go quicker from here. But number two is too much cash inside of portfolios. What we call cash drag. This isn't talking about you have too much cash in your high old savings account. That's a different conversation. That's about cash flow and how much you're adding to your investments. So this is about how much cash is actually inside each of your investment portfolios. So you might look at your account and say, hey, well, I'm intention to be 100% equities. That's the way we're invested. But if you look at the underlying of the portfolio construction, you end up 3% of the portfolio is in cash. Right, because custodians had to make money a lot of times. It's by keeping a little bit in cash. I mean, like literally cash, a cash sweep, it's not even the high-yield part. And now you have 0.51%. That makes sense that that's reasonable. But if you're looking at your account and you have 2%, 3% 4% in cash, again, in the grand scheme of things, you're not going to retire or not retire because you have that. But if we're talking about optimizing and we have an extra 2% of your portfolio in cash, which is going to dramatically underperform the stock market that you think you have, it's a big deal. Hey, 3% in cash. We charge 1% to manage your entire financial life. It's not a pitch about our fees or not. But I'm just, if you really want to talk about 1% here and there, an extra 2% sitting in cash within your portfolio adds up. This is why target date funds are not our favorite way of investing. I'll put it like that. So target date fund is typically set up within your retirement account. Typically, your employer sponsored 401k, where you own one fund, and it's a combination of a bunch of different funds inside of it with the idea that it gets more and more conservative as you get closer to retirement. So if you have a 2060 fund, the idea is the portfolio will slowly get more conservative. And by that, we mean more fixed income, more cash. So that when you get to 2060, the entire thing is effectively available for you to take out. Now, we have many problems with this idea. The first of which is just because you're retired, doesn't mean you need all of your money in a duffel bag ready to go. You're 62, you're retired. You need another 30 years for that money to last. So you still need equities, not as much as you need it when you were 35 or 45, but you still need some in equities. So the idea that you're letting the portfolio, the 401k, automatically get you more conservative, which I associate with lowering your long term expected return as a matter of rule, as fact, I think makes no sense. But also target date funds usually have a little bit of extra cash, sometimes 2 to 3% because you don't know what's under the hood. When you want a target date fund, you just see the target date fund. If you research it, then you can see the eight funds that make up the target date fund and Vanguard. Fidelity, they all have one somewhere better than others, some are more expensive than others. But fundamentally, I always compare a target date fund to going to a restaurant and there's a prefix menu. One price and you get seven things and you're like, awesome, that's like, get all this food, it's simple. But then you get there and you don't like three or four of the things that are there, and by the end of the mail, you're like, you know what? I would have been better off just ordering what I want to eat and paying for it. That's kind of how a target date fund is. It's made up of these funds. We would rather just unwrap that. And let's pick the three, four, five, six index funds that you want to own. Let's mitigate the cash drag that we're talking about here by not having a 2% to a money market and instead having the full 100% allocation to the portfolio that we actually want to be invested in. Stocks, 7%, historical rate of return, cash, barely one, above inflation. Even if that's a tiny part of your portfolio, it makes a difference. Really I'm doing number two and number three together. Number two is too much cash. Number three is too conservative. Target date funds, which I'm calling out because everybody has used them and I want to be clear, again, Target date funds are not the end of the world. If you're gonna manage your money, you're never gonna have an advisor. There are worse ways you can invest. It accomplishes 90% of what we want to happen. If we're trying to optimize for that last 10% that last 5%, we would do it differently because it'll lower the cash drag and it will make sure that you achieve your expected long term returns and it's not driven down by being too conservative. If you're not gonna have an advisor fantastic, right? If my brother were to come to me and say, "How do I invest my account?" I never want to think about it again. I'd be like, fine, just put it in Target date fund. Good job for investing. It's better than picking 15 individual funds and having to move it around. So we're not saying the whole thing's terrible, but you're paying a professional for all of this. Let's get that, let's optimize that. Not managing expenses is number four. And when I say expenses, I mean the operating expenses of the funds that you own. So every fund that you can own has a cost. This isn't the advisor cost. This is forget, you ever have an advisor. This is just to own the fund by itself. They range from Vanguard at 0.03 and I've seen funds that have 1.5% on the high end. I've seen 1.2, it's really a wide range. All of the index funds we like to use are below 0.1. We mostly use Vanguard, we like dimensional, ETFs, passive, and other benefit of passive investing. So we keep it low. But operating expenses are not a line item. It's not like an advisory fee. Oh, okay, I pay a drug or wealth, et cetera, this quarter, it doesn't come out. It actually, and I still don't really understand how mutual fund companies get away with this, that they process the fee and then they tell you how much money you have and everything. So a lot of times you won't see it unless you research. So you could be paying 1% for a portfolio without knowing it, because it's not a line item. And so it's just something we wanna monitor. Again, our bias, we don't believe it makes sense to pay operating expenses when the track record of the more expensive funds don't warrant paying higher fees. Let's keep fees low and own the market, but we want you to know what you own and know what your operating expenses are. Number five is not managing taxes. We don't mean withholding and projections and some of what we spoke about in prior episodes. We just mean within your investment portfolio. We talked about already mutual funds are typically tax inefficient because they way they pay out capital gains. But we also mean tax location, which means if we own dividend paying stocks, well, we don't wanna own that in a taxable account because then those dividends are taxable every single year and it's gonna increase your tax liability. We don't wanna own munibonds in a retirement account because the benefit of municipal bonds are their tax rate. So owning a tax free investment inside of a tax free account doesn't make sense. You'd rather own that in a taxable bucket. If you have high fast growth AI or tech, maybe you wanna own that in your Roth IRA because they're more likely to grow over the long term and we want that the faster growth vehicles to be in a tax free account because you're gonna benefit from that faster compounding. So this is called tax location and it's both the funds and the way you invest. It is also where you are choosing to place those individual investments within your portfolio. And the best way of organizing and thinking about location is imagine, and this is what we do with clients, you're a household allocation. You might have a Roth IRA and IRA, a 401K, a 529. Instead of thinking of how should each individual account be invested? We wanna think about it. How should your household be invested and then let's pick the most advantageous individual investments depending on the tax structure of that vehicle. It's called tax location. It's something you absolutely wanna pay attention to when it comes to managing your money, having an investment program. - Yeah, love it. - Heavy giddy and just brain dumping investment thesis one by one. So some advisors don't like talking about being passive investors like, oh well if I'm passive, then a client could just do it themselves and what do they need me for? We've just always taken the opposite approach of that which is a, we're not talking about investing. We're talking about everything else. Insurance, cash flow, tax planning, estate planning, everything. But even when we're coming to investing, passive is just the type of funds wheel. Then the work starts. Then we get into tax location and keeping cost low and rebalancing, taxless harvesting and everything that comes out of it. So I'm gonna summarize as we wrap up here because we know we've gone in a bunch of different directions here. Number two, you have too much cash within the investment portfolio. Too much cash, cash drag, lower the expected return over time. Number three, you're too conservative. Meaning you have too much in bonds without necessarily meaning to wanting to. to, it just happened, and again, expected return drops, the more fixed income or bonds you have at the risk of having more equities. Number four is not managing the operating expenses of the funds of the portfolio you own, which is difficult because it's not a line item, you actually have to go check what it is. Number five is not managing the tax structure of your investment accounts. This both means the funds that you are choosing, and the way you are choosing to manage your household portfolio by not placing the most tax-efficient individual vehicles in the right bucket and the least tax-efficient in the other kind. And number six is owning target aid funds just because. Again, it's not the end of the world, and if you're cool with that, fine. But if you already have an advisor, if you're already looking at managing this in a more optimized way, target aid funds can be set aside in favor of owning the individual index funds that will limit cash drag, increase return, and not let you get more conservative at the wins of the years passing rather than your actual time horizon and risk capacity. You nailed it. That's what we have for you today. We hope you enjoyed today's episode. More to come next week. Have a wonderful week.