Hello and welcome to another episode of the this dude thinks podcast. My name is Patrick and with me as always is Steve and we're just a couple of dudes talking about dude things from a dude perspective, dude.
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Today we’re talking about personal investing, and, we’re going it up into two parts. With part one being focused on how to manage your personal 401(k) and part 2 being focused on building a single stock portfolio. We’ll get to what that means in a minute, but, because we are talking about financial decisions, we must, despite every fiber of our dudeness being opposed to such things, state the following disclaimer.
Disclaimer: “The views and opinions expressed on this podcast and the information contained in the show notes is not intended to be a source of advice or recommendations with respect to the material presented or the companies, mutual funds, or prospective investments being discussed, and the information and/or documents provided do not constitute investment advice. In addition, this show received no compensation or other consideration from any of the companies mentioned."
First off, I’d like to ask Steve, since this was a special request from him, to “reback” the question to me, and then we will start going through all the questions he brought forth.
History of retirement planning in 2 minutes –
Defined benefit pension plans – Government, UAW, etc. CALPERS, where the investments are managed by professional investors.
Personal Retirement Accounts including IRA, 401(k) and Roth IRA
401(k) established in 1979 – Tax deferred, so the play is if you believe tax rates are going to be lower in 20 years, you should do 401(k)… Also limits are quite high. – Always max out your match if at all possible. Otherwise you’re just leaving money on the table.
Individual Retirement Account (IRA) – Tax deferred like the 401(k), but maintained without company match, etc.
Roth IRA – This is not tax deferred, which means you pay the taxes now and later you will not pay taxes on whatever growth occurs. So the play here is you believe tax rates will rise in the future, which has been a running assumption on Wall Street for a while, though I don’t necessarily believe that they’re right.
HSAs – Now this one is important, and a big win for a lot of folks
Types of professionally managed standardized investment vehicles – I’m making up some words here, but I wanted to group Exchange Traded Funds with Mutual Funds to contrast them.
Exchange Traded Funds -
Definition: An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product, i.e., it is traded on stock exchanges. ETFs own financial assets such as stocks, bonds, currencies, debts, futures contracts, and/or commodities such as gold bars. The list of assets that each ETF owns, as well as their weightings, is posted on the website of the issuer daily, or quarterly in the case of active non-transparent ETFs.
Examples: 20 Best ETFs for September 2024 and How to Invest - NerdWallet
Mutual Funds –
Definition: A mutual fund is a financial company that sells shares to investors, and then invests the proceeds in securities like stocks, bonds, derivatives and short-term debt. The combined holdings, which can comprise hundreds of securities, make up the mutual fund’s portfolio.
Examples: Best Most Popular Mutual Fund Rankings (usnews.com)
In Part 2 of this double episode, we’re walking through how to create and manage that portfolio. We hope you enjoy it!
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