(beeping) (upbeat music) - Welcome back to Portfolio Rescue. Remember our email here, askthecompoundshow@gmail.com for any questions. Today's Portfolio Rescue is sponsored by Innovator ETFs. Innovator rolls out these defined outcome ETFs. A lot of the time, we've talked about how they have downside protection. A lot of people want that, especially older investors.

A lot of the questions we get from our audience deals with, I want more upside. I'm young, I have a high risk tolerance. So Innovator just released this new ETF, the Uncapped Accelerated US Equity ETF, XUSP. Here's how it works. One-to-one downside with the market. There's no downside protection here, but some people who have a long time horizon don't need it, but it holds four quarterly upside options on the S&P that are staggered throughout the year to provide a little diversification.

You see, these are the current accelerated returns, right? And there's no upside on these caps. So no downside protection, but no upside cap either. So what's the catch here? 'Cause you can see these are the percentages of the S&P that you get. The only big caveat here is that the first 5% of your upside is gone, 'cause that's the cost of the options, right?

You have to pay something. So up to 5%. The thing is, most of the time when the stock market is up, it's up a lot. So Duncan, one of my stats from this week was, going back the last 100 years or so, the US stock market is up more than 20% in a year, calendar year, more often than it's down in a given year.

So big returns. So that's the thing. You have to eat that 5%. That's basically your cost of the options. But then you get this uncapped upside when the stock market does really well, you're gonna do better. Pretty interesting. If you wanna learn more, innovatoretfs.com. All right, Duncan, this week we had a little offsite and someone in the firm asked me, what's the most asked question we get?

There are some usuals like, what to do with a lump sum is a big one. Should I invest in levered ETFs? How much should I be saving? How does Ben have such a wonderful Hawaiian shirt collection? These types of things, right? But if there's a single subject we get the most, it's about taxes.

And last week we had Bill Arzaronian on and I asked him, why do you think we get so many questions about taxes? 'Cause I mean, it's gotta be 50% of the questions. And he said, probably rightly or wrongly, most people assume, I'm a good investor. I can handle this.

I follow the markets. I know what to invest in. I got that part taken care of. But a lot of people really are worried about making a mistake with taxes, right? And I think a lot of times it's a mistake of omission. The tax code is so confusing and hard to understand that people assume that there's maybe a break that they're missing out on, or there's something they're doing that they could be doing.

And so the other thing is people truly hate paying taxes, but we do get a ton and ton of tax questions and it makes a lot of sense that people just don't wanna screw things up. And people just really, I think that's something we can all agree on, that people hate taxes.

- Yeah, hate them. - Correct? - And it's like such a complicated structure that I think no one really fully understands. - And having said that, no tax questions this week. - Yeah. - We did it. We got a lot of other good ones, so let's do it. - We saved those for the bills.

- Okay, there you go. All right, let's do one. - All right, first up, we have a question from Jamie. Kind of a bummer to start. You know, yesterday was your birthday. I mentioned to you, I was like, "Are you sure you wanna start out the day on kind of such a bummer after your birthday?" But yeah, happy belated birthday, by the way.

- All right, thank you. - So first up, we have a question from Jamie. Both of my parents have passed away, with my father passing a little over a year ago. He left us $263,000 in a savings account in my childhood home that was paid off. We sold the home for $550,000, and I paid off my home and all debt with $201,000 of this money.

I started way too investing, opening a 403B in 2014, that I make small contributions to. The 403B account is at $22,000 now, and I have a Roth IRA with $5,000 in it. I have $92,000 of savings. I'm not sure what I should do with it. My wife took a year off to be with our baby boy, but is returning to work in September.

I've never had much money before, and I feel like I need to hoard it in the bank, but I know I'm losing money leaving it there. Can you help me figure out what I should do? - Yeah, condolences, obviously. - Yeah, sorry for your loss. - Sometimes this is reality, right?

It's strange to think about, but there's gonna be a lot of this in the coming year. So John, do a chart on of this population demographic here. There's way more older people than ever before, and unfortunately, that means there's gonna be a lot of people dying in the years ahead.

It's kind of morbid to think about, but it's true. There's a lot of old people. A lot of baby boomers in the years ahead are gonna be retiring, and we're gonna have to take care of them, but also there's gonna be a lot of older people kind of passing away, unfortunately.

So I think this is more of a psychological question than a finance question, right? This is a huge change in your net worth. It's gonna change the way you feel about money, the way you think about it. The good news is, it sounds like you've cleared out some debt payments, and you're not just blowing through this inheritance.

So you're off to a good start. You're being thoughtful of it. And considering you got a late start for retirement, and your balances are still relatively low, especially if you compare them to the value of your house that's now paid off, you have a chance to right the ship here.

So I think it's totally understandable. You have some fears about what to do with it. It's a lot of money. You don't wanna screw it up. Plus, there's probably a lot of emotional baggage tied to this, since this money came from your parents. Well, here's the first step that's a no-brainer, I think, before we even get to the lump sum.

You can bump up your retirement contributions in a big way. If you paid off your house, your credit card, and your car, we're probably talking thousands of dollars a month that you've freed up in cashflow, right? Now, you can take some of that disposable income. My rule of thumb is, you should try to save at least half of every raise.

And I consider debt repayment, when you pay your debt off, that's a raise. Student loans get paid off, that's a raise, right? But save at least half of it. So that way, you give yourself a little bump in the standard of living, but then you're also saving, and you don't see that money hit your checking account ever, and it just goes straight to it.

So figure out how much you're saving each month from those debt payments that are not going out anymore, and save at least half of that. That's a huge win right there. And that's dollar cost averaging into the market, so that can maybe, you know, assuage your fears a little bit about being worried about what's gonna happen in the market.

So that should help supercharge things, especially since you're slowly averaging into the market, and you have some relatively smaller retirement balances. Step two is you have that $92,000 in a lump sum. Now, here's the thing, you're house rich. So you probably could level off your retirement savings a little bit, and kind of play catch up a little bit.

The first thing I think you should do, though, carve out a piece of that money, whatever it is, a percentage or an amount, and enjoy yourself. Go on a vacation, go for a really nice meal at your parents' old favorite restaurant. Buy something you normally wouldn't do with disposable income.

Like, treat yourself a little bit, splurge on yourself. I'm guessing it'll make your parents happy to know that you took that money and did something enjoyable with it. You could also pre-fund some future goals, right? Maybe daycare, since your wife is going back to work, you have a new baby.

Maybe it's a future family vacation. Maybe it's a 529 plan for your son. Maybe you wanna shore up your emergency fund. Yeah, some of that money should probably go into your retirement account, because you have to make up for some lost time since you started late, and you said that your balances are relatively low.

So you come up with some sort of allocation, emergency fund, 529, family vacation, splurge, and then retirement. Break it up how you want, and then slowly put it to work. You don't have to do it all at once, right? But don't leave it all in the bank either. Like, you should do something because you have a chance to sort of right the ship here, and using that lump sum can help.

But I think the biggest thing really is you paid off those debts, that's good. Now take that income that you freed up and increase your savings rate, and then you're helping yourself for the future 'cause you're saving more and more each month. Thoughts? - Yeah, I feel like, for fun, you could even do that grand tour of the whole world, Viking cruise thing.

I don't know if you've seen that, but it's literally, it's like 40 days or something. I think you could do that for that. - I thought the pandemic kinda canceled cruises, no? - Oh, no. - People are still doing that? (Duncan laughs) - No, I think they're roaring back, but yeah.

Just kidding, though. - Yeah, try a little bit. - I think that would use up the full amount of savings. So just kidding, don't do that. - Okay, that should've been your honeymoon, Duncan. All right, let's do the next one. Okay, up next, we have a question from Don.

I'm in my early 50s with a net worth of around $2 million and a nice salary. My expenditures are very low, no mortgage or other large outlays. My 24-year-old son has a disability, but limits his income potential. I like working and don't plan on retiring early. Does it make sense to think about my investment horizon from my son's perspective rather than mine?

In other words, instead of rebalancing into a more conservative portfolio as I age, should I stay invested in riskier assets so that he and his trust may reap the benefits long after I'm gone? - He's certainly thinking about this in the right way. This is the right way to think about it.

Like, does your time horizon change? I think everyone has different time horizons and goals. And even if retirement is one of the biggest ones for most people, you still have to balance out your short-term needs with your long-term desires to keep up with your standard of living. It's one pool of money, so this is essentially a form of mental accounting, but I think it can help to break this up into different buckets.

I've talked about this before. But your glide path might be differently. So you're 50 years old with $2 million now, right? Let's say you work until you're 65. If you save nothing else and just manage to grow your net worth at 5% a year, we're talking $4 million by age 65.

So you're in a pretty good spot. But you have to build your son's needs into your financial plan, it sounds like. So are you investing the money for when he retires someday? Are you investing the money for when you pass away someday? Is he gonna need some more money to live on?

Are his insurance needs being met now? And would that change if and when you do pass away? So I think thinking through this can help answer this question. And it depends on kind of when you need that money. But I think everyone's time horizon risk profile is different depending on their goal.

So I think you can have different streams in your portfolio that you're using for different goals. It's just one big bucket. But I think if you break it up like that and you set a pool of capital aside that's gonna be for your son and invest it based on his goals and his time horizon, that makes sense.

Again, it's mental accounting. It's a way of bucketing within your one big pool of assets. But I think that, yeah, that makes sense that part of that capital is gonna be invested way longer. It's just like people who say I have enough money for myself and the next few generations I'm investing for the grandkids.

Yeah, then you leave that money in the stock market longer probably 'cause you have more decades to invest. But it depends. It always depends on when your son is gonna need that money and when are you gonna need that money. - Yeah, it seems like such a kind of freeing idea in a way, right?

Because it's, yeah, the time horizon is pretty much limitless instead of constantly being concerned with, yeah. - But that can take away some of the worries though 'cause that's one of the worries for a lot of people in retirement is I can't have as long a time horizon anymore because I need to spend a lot of this money.

But yeah, if part of that money, if you can take a certain percentage of it and keep it in the stock market longer for your son, yeah, it can be a little freeing so you don't worry about it as much. - Right. - Let's do another one. - Okay, so up next we have, I have a house with the low interest rate of 2.75% that I refinanced a year ago.

My family has grown, three kids, and it might be time to get a bigger house. My problem is that mortgage rates have skyrocketed and now I could probably get a 5.75% rate. Is there anything I can do with this low rate asset or am I stuck selling my house at 2.75% and financing at the higher rate?

How much would you value that change in rate assuming both houses are $500,000? Is there a way to calculate that? - There is a way to calculate that and I think this is something millions of people may be going through in the years ahead. Now I've talked before, it's quite possible rates come back down the next time we go into recession and the Fed lowers rates, that mortgage rates could come down.

It's also possible that sub-3% mortgages are a thing of the past and that was just this one 18 month window that we had and maybe it's never coming back. I don't know. My wife and I actually went through the same exercise when we had twins. We realized immediately that our house was way too small for three kids.

It just wasn't gonna work. And so we actually, side note, had our twins in May, I think this was 2017, and we moved into our new house in June. So that was a busy month in the household or hectic time in the Carlson household. I wish I had better news for this person.

Unfortunately, you're kind of out of luck when it comes to that mortgage rate. Now, right now, here's the thing. You're borrowing at a lower rate than the federal government, right? If we look at all the rates, the 12 month T-bill rate is like 3.2%, two year, 3.2%, the five years, 3%, the 10 years, 2.85 and the 30 years, 3.1.

So your 2.75% mortgage you've refinanced into, you're borrowing at a lower rate than the federal government, which is going to be very hard to get rid of. So let's assume you have a five, you said $5,000 house, right? At a 20% down payment, 2.75% mortgage rate, we're talking about like a little over $1,600 a month that you're paying, no taxes or anything on there.

If we bump that same level up to 5.75%, now we're talking about over $2,300. So we're talking $700 a month in higher payments. What's that, $8,400 a year? It's tough. So here's the options as I see them. You just suck it up and buy a bigger house. It's probably gonna make you happier.

It stinks, but what are you gonna do? Would you rather stay in the old house and save some money? You can't live in a spreadsheet, right? So, and again, it's possibly gonna be able to refinance in the years ahead as rates come down. You could always take some money out of your current home.

You probably have some good equity in it. Renovate your current home. I don't know, add another bedroom somewhere. Maybe do a Mike Seaver above the garage. Is that one too old? Growing pains? Duncan, is that over your head? - Yeah, that was over my head. I didn't watch that one.

- Okay. You could look at some other forms of financing. I mean, maybe, I was gonna say an adjustable rate mortgage, but I looked at them this morning. A five-year arm is 5.7. It's higher than the 30-year fixed, which is 5.5 right now. So that's out the window. Maybe a higher down payment because of your current equity.

Maybe a 15-year mortgage. The problem is all of these options are gonna cost you one way or another. So the only thing that matters is, is it worth it to find a new house for your family? So these are the kind of problems that are solved qualitatively, not quantitatively, unfortunately.

And it's gonna be really, really painful to let go of a sub-3% mortgage. I can say, there's no way I can sugarcoat that. But if you have to move, sometimes you just have to move. - Right, yeah. This is about more than just the money, right? If it's a growing family, that's kind of-- - Unfortunately, and again, I think there's gonna be a lot of people that are gonna be making this, having this debate in the coming years.

It's going to be tough. Hey, see, someone in the Slack, someone in the comments got my Kirk Cameron reference there. He lived in the apartment above the garage on growing pains, which was also-- - Oh, so yeah, like the Fonz. - Yeah, so also growing pains, possibly the greatest intro song of any 1980s show.

Look it up sometime, Duncan. All right, let's do another one. - Okay, I'll take your word for it. Okay, up next, we have a question from Devin. And this one starts out with a nice not to brag. I'm a high-income earner, married with no kids, 30 years old and no debt.

I live in Manhattan and have been considering purchasing a home in New York City. My budget is around $1.2 to $1.6 million for a two or three bedroom. This breaks down to an $8,000 to $11,000 mortgage plus fees all in for a monthly payment. Wow. For each of the buildings, we have been evaluating both co-ops and condos.

The returns, even over the past 10 to 15 years, appear to be absolute dog excrement, benchmark to S&P. Broadly speaking, the units were $950,000 to $1 million in 2010 and now sell for $1.3 million. The returns on these units make zero sense when you factor in yearly maintenance fees, et cetera.

It seems like owning your unit in a high-cost living city is simply paying a premium to have security. There's no material gain if investing is commensurate with the mortgage. Is this correct? - All right, so the real estate market in New York is frankly foreign to me. So let's bring in someone who has lived in New York his whole life, Barry Ritholtz.

- The blog father. - Barry. - Hi, Barry. - All right. So Barry, I got this, I got this on my chart. John, let's do a chart on real quick. So Case Shiller actually has a condominium price index for New York. And I looked at this, it goes back to the '90s.

And we're talking about like a 5% annual gain. But that's price only, right? So we're not talking about all the fees and everything. What do you think about the returns on a seven-figure Manhattan condo these days? Is it, does it ever make sense or are you just buying convenience by doing that?

- So a couple of things. First, I don't know where you're getting a three-bedroom apartment in New York City for 1.6. That's, you know, I think his data is wildly off. So two key things. First, you gotta live somewhere. You can't live in an ETF. You can't live in a mutual fund.

You have to live in an apartment. And there are a lot of non-financial advantages to owning your own space. No one's gonna raise the rent on you. No one's gonna tell you, "Sorry, not renewing the lease, you gotta go." You can paint colors other than white. You can redecorate, buy appliances.

So there's a lot of trade-offs when you're a renter. That said, over the long periods of time, you know, real estate more or less returns zero net of inflation. Taxes, maintenance, all these things. So the idea that you're thinking about real estate, the way the parents of the post-war generation did.

My parents bought a house for $38,000 and 30 years later, sold it for almost half a million dollars. And that house today is probably closer to a million dollars. So the baby boom and the post-war generation, they had an advantage that you're just not gonna get today. There's more people, there's more NIMBY, there's more regulations.

Real estate isn't as an attractive investment as it once was. - Also, I think the last few years, these enormous gains we've seen in the pandemic are gonna screw people's thinking on this in the years ahead, right? - That's right. You end up with a baseline that is, you know, suddenly everything is really expensive.

And if we look at real estate from an investment perspective and say, "Hey, are we buying a growth property or a value property?" Nothing really looks like value properties today. And we know what happens if you top-tick growth stocks, you pay a price. But the bottom line is you have to live somewhere and the quality of life that you get owning your own property, it might be worth the loss of return.

- Right. So how, explain to me, how egregious are the fees that you pay in some of these condo buildings that you buy? 'Cause you have to pay all the upkeep and maintenance fees and it's like, that's part of it that people probably don't think about either, right? - So my wife and I looked at, we moved out to the Burbs about 20 years ago.

I'd lived in the city for a long time. And the fantasy was always a pied-a-terre in the city. We'll get our own place, we can leave our clothes there. We've, you know, I'm stuck at work late at night. I could stay at the apartment. And the problem is even a modest co-op, you're paying $1,500 a month for co-op fees.

And that covers the taxes, the maintenance, all these different things within the building. Well, even expensive New York City real estate, New York City hotels, you go to a decent hotel, it's four, five, $600 a night. If I'm paying 1,500 a month every month, hey, that's 36 nights in New York City.

I never spend that much time. So the math didn't work. If you have to live in the city, well then you're probably gonna have more control and enjoy it more if you own it. But it's a cost, it's an expense. It's not an investment. And the people who got really lucky.

Now, when I was in grad school, all the co-ops or all the rental buildings were converting to co-ops post '70s. So in the '80s and '90s, as interest rates came down, buildings that were once rentals became cooperatives and people started to own it. And I know people who bought apartments for 20, 50, $100,000 and sold them for millions.

That's done, that was a once-in-a-lifetime thing. And that's not gonna happen again. - Aren't A2/A3's essentially like paying rent on top of your mortgage? - You're an owner of the building. - 'Cause they can grow up forever, right? - Right, so you're the owner of the building, you pay all the salaries, you pay all the maintenance, and that's assuming that the elevator didn't die and there's a one-time special assessment that's $4 million divided by 200 residents, or the roof needs to be replaced, or the building exterior has to be cleaned, or the windows need to be upgraded.

You're an owner, the difference with a homeowner is you decide when you replace your windows. The board decides when they're gonna do it, and if it's inconvenient to you, too bad. - Yeah, and I agree with you that the comparison of an S&P 500 return versus a house, that shouldn't go into this, that's a different story.

- You gotta build in rent. - Exactly, you have to live somewhere. - You have to pay in rent and all that other stuff. - Right, and I think the average rent in Manhattan right now is $4,000 a month, I think I saw that recently in an article. - For a one-bedroom, so I don't know where anyone's buying a three-bedroom for 1.6, that's-- Hey, if you find a three, Devin, you can find a nice three-bedroom for 1.6, grab that.

- Probably should. All right, let's do the next one, Duncan. - Okay, we have a question from Joshua. My grandma is 85 and has about $350,000 to $400,000 in an account that an advisor at a big bank manages. Ideally, we would take it out and diversify with index funds, as you guys have talked about, but I don't think this is an option.

My grandma does not know anything about the market, and to complicate things, I'm a co-trustee with my aunt over the money and other assets. She does not like the advisor we currently have, so I found a highly reputable local wealth management company that is fee-only and charges $3,000 a year to manage a portfolio.

When I brought it up, she declined and said, "Let's just leave it where it's at." She will be visiting in December. Any advice on how I can help her see the value in a fee-only service? And can you kind of just briefly describe what this even means for our younger and newer investors?

- Yeah, so like fee-only versus, like the old world is brokerage where you're paid based on commissions for selling products, and then fee-only would be, this one sounds like a flat fee, or it could be a percentage of assets, or some people do an hourly fee. That's the idea.

You know, having financial conversations with your family is never easy, but it shouldn't be a taboo subject. But Barry, this is a tough one because when my grandma got into her 80s, she was so set in her ways, changing her mind about anything was probably non-existent, it's not gonna happen.

But with anyone like this in your family, I have these conversations all the time. There's some people who just, they know nothing about the financial world, the markets, and maybe they don't want to. How do you even start that conversation with someone who just knows nothing? - So first, grandma's 85.

She has less than half a million dollars in assets. She's paying what looks like a 1% fee, which normally includes a whole umbrella of services, estate planning, tax planning, financial planning. I get the sense Joshua's grandma doesn't really need that. So she would be, I think she would be better off with a simpler, less expensive approach.

To answer your question, Ben, how do you bring this to someone who's set in their ways? You could say, hey, you know, we could go to self-directed or Vanguard, and you have the Vanguard total market, and maybe a Bloomberg Barclays Ag bond fund and an overseas fund, and those three holdings are all you need, and we'll save you $3,000 a year.

You don't have to pay for this. So that's one approach. I'd rather not see you-- - My problem there, though, is that if something goes bad and you say, you know, I'm just gonna take this over for you and put in index funds, when the market goes down, you're getting blamed instead of the advisor.

And that could make it contentious in the family. - Well, you could, you then have to keep a spreadsheet and say, hey, you would have gone down even more if you left it where it was, plus we're saving you $3,000 a year. So that's absolutely a risk. But, you know, I like to get value for what I pay for.

I don't mind paying my accountant a lot of money if he can, you know, maximize my tax circumstances like you guys were talking about earlier. I don't get the sense that she's really getting value for the 3,000 a year. Even a robo-advisor, I don't know if that's best for grandma, who probably isn't gonna wanna log in online constantly at 85, but saying, we're just gonna buy the whole market and you're good, and we're saving you three grand a year, I think that's the most persuasive approach with us.

- Yeah, and the other thing is, if they really want to go into a fee-only service, I think you as a co-trustee, you take that meeting, and then you hear it all out, and you lay it out to grandma, here's what you're gonna get, and here's what's gonna happen with this money, here's how it could benefit you.

And I think you lay it out, you kind of give her those two options maybe. We could make it easy, we could put you in two index funds and make your life easy and move the cash around for you, or we could have this fee-only service do it for a pretty low fee, and here's all the things they can do as well.

And just kind of show her what she's not getting right now. - The key question is, how much does she need to draw down each month from that? And if she doesn't, well, that makes it even easier. That's the biggest complication. If she says, "Hey, I'm taking 1,000 a month out of this," or 2,000 a month, well, then it's gonna make it a little more complicated, but you go to Vanguard, you go to Fidelity, you can automate that also.

So it's really just the initial setup for her. - Yeah, so we talked earlier about the most asked questions we get here. That's another one that's big for a lot of retirees that listen to the show is, how do I begin to take money out? A lot of people just, accumulation is a lot easier for some people than actually taking it out, 'cause that's another emotional cost of, well, I'm taking away my life savings.

How do I spend this down correctly? - That's a tough pivot for people who've spent their whole lives working to turn around and say, "Okay, now I'm free to travel, to spend, "to give money away." Emotionally very challenging. - Yep, all right, Duncan, last question. - Okay, also, Joshua, show your grandma this episode.

Have her watch some "Portfolio Rescue." And hey, Joshua's grandmother, if you watch this. Okay, so last but not least, we have a question from Eric. "I'm 50 and have $750,000 in my 401(k) "and $500,000 equity in my house. "I was thinking about taking a HELOC out for $250,000 "and putting half of it in Google "and the other half in Apple.

"Does this sound like a feasible plan?" - So my initial thought is no, not a great plan. That's the initial thinking. But I mean, how do you even think about taking some sort of massive risk like this and position sizing? And I understand the idea of, I have a lot of equity in my home, I want to take it out and do something else with it and maybe put it into the market.

I think maybe the line of thinking here is, if you're investing in some sort of index, if it's a NASDAQ 100, you already got a lot of these names in there. Even if it's an S&P 500 index fund, you're probably going to have a lot of exposure to these companies.

What's the point of making such a huge concentrated bet in two companies like this? - Right, no doubt. There's a little survivorship bias there. You're looking at the ones that have already done well. But it's always a bad idea to leverage yourself up to invest in the stock market.

Because if the market ends up going down, now you're paying a monthly amount on your HELOC for a not especially diversified portfolio. If Eric would have said, I'm thinking about taking a HELOC and every year, renovating part of my home to make it more valuable and then paying it down.

And this year I'm replacing the windows and next year I'm replacing the roof, like the person in the co-op. All right, I could live with that. That's a good use of the equity in your home to make that home more valuable if you're managing it. But to throw it at two stocks that have already had legendary, spectacular runs, it's a bad idea from a leverage perspective.

But even going into those two stocks is an even worse idea. You're just really gambling literally with your home. Not quite rent money, but you're gambling with your house. And that's rarely a good idea. - That's the concentration here is the most, even if you had, let's say, take out the HELOC thing out of it.

You have a lump sum you're investing. Putting it into these two stocks. I mean, do these two stocks seem like they should be safe bets for the next-- - Two, three decades. - So which two stocks would you pick then? (laughing) - Does VTI count? I mean, that's the thing though.

I mean, in 2000, you probably would have said, I'm gonna put all my money in GE 'cause they're paying a 4% dividend and this company is so diversified and it can't lose. And it's down 80% since then or something. - Right, GE and Citi. That would have been a great combo bet.

- Yeah. - Oh boy. - And I'm not saying that's going to happen to Apple and Google, but it exists where the stock market can do okay and concentrated positions in stocks like these can do horribly for you. So I think the concentration here, I mean, if you really wanna put some money into Apple and Google, make a much smaller bet.

That's fine, but this is a huge, you're talking about taking potentially 25% of your portfolio into two names. That again, you can get a decent amount of exposure in these in an index fund and then you also spread your bets more too. - And don't do it with borrowed money.

If you have to borrow money to invest in the stock market, what you're really saying is you can't afford to make this investment. It's one thing you have a 30-year mortgage on a house and you wanna fix it up because it's your single biggest property. It's the single biggest asset you have.

That's one thing. But to borrow money to put it into the stock market, that just never works out well in the long run. - And you have a higher hurdle rate now because 12 months ago, you're probably talking a 3% HELOC rate. Now it's like five and going up as the Fed keeps raising rates.

It's gonna be a higher hurdle rate too. All right, Barry, I have one more question for you. - I just have one other thing. If Eric did this, wouldn't his wife basically become that of a hedge fund manager? Isn't he gonna be tracking this like every minute of every day?

- That's gonna be an uncomfortable quarterly conference call with the investors each three months. - All right, Barry, one more question for you. Better form jumping into your pool, me or your dog Teddy this week at our pool party? - I gotta give it to Teddy. Teddy flies through the air.

- Yeah, I think so too. That's the right answer. - I mean, you did a killer cannonball, but Teddy, who's a Portuguese water dog, we open the pool early and keep it open late for him. I mean, we open in May and we- - I didn't know he had water dog in his name.

That was an unfair question. - Literally Portuguese water dog. I've taken him to the beach in February, throw a stick in the water. He's in, he gets it, he brings it out. I have some slow-mo videos of him leaping into the pool. They're hilarious. He's a lot of fun.

- And he eats watermelon. - Yes, he does. - That was awesome. I fed him some watermelon. - He likes watermelon. He likes carrots. He's a funny little dog. - As always, dogs are the best. Remember, if you have a question, askthecompoundshow@gmail.com. Thanks again to Barry for his help as always.

We appreciate it. If you're listening to a podcast form, leave us a review. If you're watching on YouTube, hit that subscriber button for Duncan. Tomorrow, another Compounded Friends, I believe, Duncan, correct? - That is right. - All right, new one coming. Again, askthecompoundshow@gmail.com. Keep those questions and comments coming, and we will see you next week.

- See you, everyone. (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music)