The word is out on using low-cost investments over complex Wall Street strategies (and if you don’t believe us, we’ll quote SIGNIFICANT studies on today’s show). Yet, new expensive products are built every day promising better/faster/more wealth. What do you need to know to simplify your strategy and stay the course? In today’s headline segment we’ll dive into diversification and keeping your portfolio simple. We’ll share why it’s important to question more complex strategies, and discuss solutions that wealthy investors truly are using to increase future income streams while keeping things low cost. We’ll also shine a light on a popular investment manager who’s working directly opposite the trend that we’re suggesting, Cathie Wood of ARK Investments. We’ll share the wild ride up and our thoughts on her recent issues and disastrous returns.
We’ll also take a call from James, wondering about ABLE accounts. These are wonderful tools for people with special needs who are diagnosed early in life, and can help individuals avoid significant taxes. How do they work? What do you need to know? We’ll share.
Of course, we’ll also dive into Doug’s amazing trivia question of the day, which shines a light on a high cost investment option: hedge funds…while saving time for a TikTok minute you won’t want to miss.
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
Enjoy!
Our Headlines
- When Wall Street Rolls Out the Red Carpet for You, Who Pays? (Wall Street Journal)
Our TikTok Minute
Doug’s Trivia
- Where does the term hedge fund come from?
Better call Saul…Sehy & OG
- Stacker James from NH has a question about ABLE accounts and what advice we have when saving for special needs situations.
Have a question for the show?
Want more than just the show notes? How about our newsletter with STACKS of related, deeper links?
- Check out The 201, our email that comes with every Monday and Wednesday episode, PLUS a list of more than 19 of the top money lessons Joe’s learned over his own life about money. From credit to cash reserves, and insurance to investing, we’ll tackle all of these. Head to StackingBenjamins.com/the201 to sign up (it’s free and we will never give away your email to others).
Other Mentions
- Guess Who Created The Index Fund? (hint: you’ll be surprised)
- ABLE Accounts – Tax Benefit for People with Disabilities
- p907.pdf Tax Highlights for Persons With Disabilities
Join Us Friday!
Tune in Friday for a special show, as it’s our 1499th episode! We’re sharing YOUR success stories AND stories from the past, present and future of this fine show.
Written by: Kevin Bailey
Miss our last show? Listen here: How To More Effectively Rearrange Tasks: Manage Your Energy and Time with Google’s Productivity Expert Laura Mae Martin – plus an appearance by former President Barack Obama (SB1497).
Episode transcript
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───
He’s the type of guy you get halfway home from the theme park before you’re like, oh, where’s Doug? ━━━─━ Oh no, we have to go
back. My wallet’s in his fanny pack. So, ───
oh,
do not feel bad for Doug. He’s terrible. Every time he tells a story somewhere,
a child loses a balloon. ━━━━─━━━━━─━━━━━─━━━━━─
Live from Joe’s mom’s basement. It’s ━━ the Stacking Benjamin Show. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
I am Joe’s mom’s neighbor, Doug, and on today’s show we are talking fees. If using indexes for your investments is a proven winner, why is Wall Street obsessed with driving you toward other options? We’ll talk about investing, strategy, advertising and more, but that’s not all. We’ll also answer a call for help from a stacker who said I’d better call salt.
See hi and OG with my burning financial planning question. I think they might need a doctor for that. And I’ll also swoop in with some absolutely mind blowing trivia. And now two guys who are ready to rock your financial planning world, it’s Joe ━ and oh, ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
hey there. Stackers in Happy Wednesday after. I think we got to og. I think we got preempted on Monday. What the heck? It happens. I, uh.
I don’t think we can trust our staff. I know we have trust
issues. I’m not sure we can trust the stackers. ’cause you see all the great reviews. Everybody’s like, uh, can we just get them please?
I like the new edits you did to your
show.
Yeah, ━ I like that one person who said finally. ━━───
Great stuff. If you missed Monday’s, uh, April Fool’s Day episode. Uh, big thanks to Tina and Karen from our team and the amazing Steve Stewart for stepping in for us on Monday. But today, man, we are bringing it. And, uh, we bring it every Wednesday with a man across the card table from me, the ━━━ og. ───
That was a lot of
unfurling. It’s an audio podcast. You gotta do the audio version of the Flourish. People that don’t know he did a hand thingy. Whoa. Which was a big flourish. ── Doug’s on mute. ─
God, I just wasn’t gonna tell him. I was just gonna wait for him to stop talking. So we just keep going. ─── And then when he’d listens he’d be like, I had something really funny there.
That’s weird. They cut it
out. I did. That was hilarious. We should
have, well, too bad we don’t have time for that Doug. Oh, well ’cause, because, you know why? Because this show is free, because it’s ad supported. So if everybody could, uh, take a second while we thank our sponsors and keep this show free, we’d very much appreciate if you hang out with us through just a couple ads. ─────
Thank you so much to our advertisers for helping us keep the show free. Thanks to all of you for keeping it, playing through those ads. I know some people skip through it and uh, well. Uh, you don’t help keep the show around if, if you do that, uh, for very long. But enough of that, we got a great show ahead, so let’s get driving. ━━
Hello Darlings, and now it’s time for your favorite part of the show, our Stacking Benjamins headlines. Our headline today, man, we’ve been ta he’s been on fire OG comes from the Jason’s week, of course, from the Wall Street Journal, getting a lot of headlines from Jason lately. He is normally really good, but now he’s really, really.
Really good. I feel maybe three or four times in the last six weeks we’ve gone to Jason. When Wall Street rolls out the red carpet for you. Who pays? He asks. Let’s start off with this. We tell people here all the time for our new stackers, that using a strategy called indexing, probably your best bet, og.
And I know that in Doug we said that, uh, indexing is a winning strategy. ── The funny thing is indexing does not help you win. Indexing helps you not lose. So why OG would I make that difference in B? Why, uh, what is indexing in the first place
when investing first came to? ─ The population, let’s say after, uh, world War ii, it was really focused around a few companies and a few individuals who knew a lot, and then the rest of the consumers who didn’t know a lot, and you would go buy stocks with your broker every so often.
They would let you know what the share price was, and that’s how you did your investing. There was very little mutual funds and there weren’t any ETFs. As investing became more popular and the industry evolved, we packaged a lot of those, uh, stocks together to make mutual funds, right? But there was still basically this idea that from an investing standpoint, there were the people that knew stuff, the people that had technology, the people that were on the ground somewhere, and the rest of the population who didn’t know enough.
Therefore, you had to hire a manager to do this for you. That’s what a mutual fund manager did. What we found over time. You know, we knew this probably 1950s and 1960s, but it took until the 1990s and two thousands for it to really kind of take hold was that ─ no professional investor is really any better than any other investor, and, and there’s no winning strategy.
There’s no one person or one company who’s got the lock on. I can always be productive. Sometimes you’re successful and you’re better than your peers, and sometimes you’re not successful and you’re not better than your peers, and there’s no statistical evidence to support who’s gonna do what at any point in time.
So it was really a crapshoot. So to hire a professional manager cost money, a mutual fund manager, you have to pay internal costs. It became pretty evident as time went on that you were paying for the services of a professional manager without actually getting any results necessarily that were, uh, a value for paying for that, that service.
So indexing or the idea of just owning one of everything became super popular or is, is becoming popular, I should say. I. Because if it’s very difficult, and I don’t wanna say it’s impossible to beat the market, ’cause people get hung up on that. People do it all the time. It’s possible to beat the market.
It’s just expensive and you can’t predict it in advance. So it’s hard to, it’s hard to throw money at that, right? If you’re gonna go hire somebody to go beat the market, you want some, you want some assurances that that’s gonna happen on some frequency and you just really can’t. So index indexing became.
Is becoming popular because you can just buy one of everything and you get the re, you get the average return. The downside is you get the average return. You’re never gonna do better than the index. In fact, you’ll always do a little bit worse because of tracking error and costs and that sort of thing.
But it’s close enough, and that’s really what you’re trying to do, is you’re trying to represent the approximation of the equity markets and equity returns. ─── On a complete side note, what’s really interesting of course, is that investors still don’t behave the way they’re supposed to with indexing, they just actively trade ─━ index funds, so a lot of investors are themselves the portfolio manager that they fired, so now they’re the portfolio manager doing it for free and still sucking as bad as the portfolio manager did that they used to pay.
But hey, at least it’s free. You know ━━ I can suck for free. It’s disintermediating. Is that the word? Doug? You’re the resident. Uh, wordsmith. Yes. Disintermediating the portfolio manager. Mm-Hmm. And now they’re their own. It’s kinda an interesting theory, but anyways, that’s indexing.
It is frustrating to see that because if you would just.
Index and leave it alone. The results are there. Edward McQueary. Uh, Jason Wrights, an Emeritus business professor at Santa Clara University studies long run asset returns. He recently analyzed how mutual fund investors have fared since the 1920s, so he didn’t wanna look at returns in theory, he wanted to look at them in real life.
So what he did was he looked at mutual funds after cost. On average versus the s and p 500 index after cost. And these are mutual funds specifically that go against the s and p 500. So 10 years later, you invested 10,000 bucks. 19 29, 10 years later, of course, the index gave you back your 10,000 bucks. You look at mutual funds closer to $7,500, 1934, so taking 24.
To 34, you had index funds around $24,000. Mutual funds returned just over 20 grand. The biggest spread was in the forties where, let’s take 1944 as an example. A mutual fund would give you $35,000 on your 10 grand, where the index gave you nearly 50,000. So huge differences. So as you look year by year at these, if you just would leave it alone, indexing is fantastic.
However. ─ The frustrating piece of this is that now we’re seeing private equity funds investing in buyouts. We’re seeing collectibles. We’re seeing these AI driven approaches. og, there are these alternative funds coming in, swooping in yet again while well. Indexing seems to be the way to go. You’re not gonna win with an index.
You’re not gonna beat the market, but you’re just gonna wave the white flag and go, you know what? I’m gonna do what the market does, and I’m gonna focus on my behavior, which is putting as much money in as I possibly can. So the question is why? Why does Wall Street then continually give us this sexy marketing about all these fantastic new products?
Money, money, money, money, money, money, money, money,
money. ── And not to you. It’s uh, I mean unless you work for Goldman Sachs or something. Oh, then
maybe, right. Leading hedge fund expenses. Now, og he writes up between five and 7% not one time. Like the old front end mutual funds everybody complains about, right?
Yeah. The, the one Dave Ramsey loves the American Funds Good company with that front end fee to get in five to 7% per year for a hedge fund per
year. ── It’s a great business if you can swing it. I mean, you get 2% a year, plus 20% of all the profits, and you’re taxed as long-term capital gains as the, as the owner of that fund, like ─── trying to turn Stacking, Benjamins into a hedge fund, just haven’t figured out the right angle ────
for every dollar return they generated from 1995 through 2016, hedge funds harvested 64 cents in management performance fees, 64 cents out of every dollar og.
Wow. Went to the manager.
Which would be great if their dollar was equivalent to, you know, 50 cents on the market or something, right? So like if it’s like, well yeah, I’m giving you a dollar, but the market’s giving you 50 cents. So of course I’m taking a little bit of that and you’re still ahead. But it’s really more like your dollar is equal to $2 in the, in the s and p and you know, I mean, ─ there’s a time and a place for alternative investments for 99.9999. ────
Repeating, of course, uh, percent of the, uh, of the stacker population here. ─ Just keep it easy, keep
it simple. ── Let’s go back to your history lesson earlier, og, which I really liked. ─ You know, it used to be that Wall Street could make a bunch of money on knowing something and the fact that you didn’t know and you’d have to, heck, when I began my career, I had to go to the newspaper to look up where my client’s mutual funds ended the day before I’d, we’d go to the Wall Street Journal and look it up and we were a day behind.
But that’s as close as you could get pre-internet. Now, of course, information is ubiquitous and Wall Street can’t make money anymore on selling these funds to the public. So there’s gotta be, there’s gotta be another way for them.
If you look at this from a planning standpoint, and this is where this has to come from, from a financial planning perspective, and you look and say, what do I have to get for my goals to be accomplished? ─
You’ll find that you don’t need to have. These, you know, gigantic, insane returns that you think you do that advertising and marketing is trying to tell you that you do need and you don’t need to have non-correlated diversi, ━ whatever the heck they’re talking about in terms of like private equity and all that sort of fancy ─ mumbo jumbo, right?
Just go get your 8% and that’s awesome. Like that’s still 6%, 5% better than inflation. ─ That’s good. You just have to do it for a long period of time. It’s, the math doesn’t work in the, in 10 years, like you just don’t see it. It just, you, you put money in and it grows a little bit or it doesn’t, the market does whatever it does.
The milestones that I want you to look for in your investment portfolio is when are the returns ─ equal to what you put in for a year? There’s a milestone. You go, Hey, I put in, you know, I put a thousand bucks a month into my brokerage account, and then all of a sudden ─ you look one year and your brokerage account went up by 12 grand and you put 12 grand in. ──
Now you’re cooking with gas. You’re like, okay, now my money is doing as much as I’m doing. That’s a huge multiplier effect. I wanna see when a milestone is, when your dividends from the portfolio, your, your, you know, reinvestments of di Most people reinvest their dividends when the reinvestments of their dividends are equal to the contributions that they put in, or equal to, you know, some percentage of the con.
Like those are the milestones I wanna see that prove to me that compounding is working. We heard that story a couple of months ago about Warren Buffett’s investment in Coca-Cola and Berkshire Hathaway, and he finished his investing in Berkshire Hathaway in, in and around 19 93, 19 94, so roughly 30 years ago.
And his total cash going into Coca-Cola, and I’ve said this on the show, was one and a half billion dollars. So in investment parlance, his cost basis is 1.5 billion, right? Last year, Coca-Cola paid him 700 million in dividends. ── Yeah, Coke has gone up, right? The value of Coke, the, the stock price has gone up, ─ but dude made half of his cost basis in cash in one year by doing nothing other than investing it, holding and going to sleep for 30 years and waking up and going, is there a check for me?
Somewhere around here? I don’t know. Oh, say Tuesday, today’s Coke
Dividend day. Where’s the check? But this is what gets in our, it’s the FOMO that gets in our way, which is why I like the planning first, because it’s not about making huge amounts of money og. It’s about never being disappointed. That your money’s not where you want it, when you want it, and that’s the winning solution.
And what’s cool about that approach then? FOMO is not a thing. You’re like, it’s okay for an investment to sound like a great idea and not fit your plan to go. Yes, that’s great. Not for me. Yes, that sounds sexy. Not for me, doesn’t meet if I start with my goal and work backward, I am totally gonna avoid all these garbage products.
And yet. They still keep cranking ’em out every single year
because we, we get in our own way. Speaking of, let’s do a quick pivot here. When we’ve looked at investing conferences and, uh, genius of the month conferences, what person, OG the last several years has been on every one of those stages and ━ all the FOMO people, the greatest investor, all the
FOMO people of all time, I think is what you’re talking about.
Most people would think names like. Warren Buffet comes to mind? Nope. Not him. Nope. Not the, Nope. Steve Cohen, the big hedge fund guy, or, or, uh, who was the guy that wrote Principle? Ray Dalio? Not him. How about Kathy? ─ Wood.
Unbelievable Doug. He knew exactly who I was referring to.
Greatest dis wait. Greatest dis investor.
Greatest. She’s, well, you tell us. Why is she number one divested?
Yeah. She was just been proclaimed over and over is It’s a new world. It’s a new economy. It’s a new, the new coming. I thought I heard the next coming of the, I thought I heard. All of that that I could hear from 2000 to 2002, and she kept piling more and more money into overvalued stocks and the room would pack more and pack more and pack more.
As she showed this new way of doing things right. The quote new way,
well, Tesla’s go into 15,000 a share. Matthew
Fox wrote this piece. Kathy Woods ARC Invest has destroyed. Their word, not mine. $14 billion in wealth. Over the past decade, Kathy Wi Ark invest according to Morningstar top the list of wealth destroyers among other investment companies.
Quote these, ━━━━━━ these funds managed to lose value for shareholders even during a generally bullish market. Morningstar said, Kathy Wood did do the impossible. She found ways to lose people money at a time when indexing again, still the answer. ─ Well,
the reason why is you can, and, and there’s gonna be people who write in and say, no, no, no.
I invested in Arc and it went up a whole bunch. I made money. But the vast majority of the money, you would look at the inflows and outflows, uh, into that mutual fund, uh, or into that, those companies, most of that money came in a came in after a big runup. And then it left after a, you know, minus 70. So it would like, it would go up 60% in one year.
All the money would come in in January after the marketing material came out, and then it would go down 40% the next year. All the money would leave in December and then the next year would go back up. You know what I mean? Like it was like this big roller coaster. I think there’s a part in there. I don’t know if this is the same article, because I read one, there was an article in there about how much money she made during that time. ─
So ─ turns out she did okay. She made, you know, whatever, five, $600 million. But, um, not if you’re an investor. Not the same for
the investors. And it’s sad because I feel like so many of us need to hear this when I think that we’ve finally broken through and people are gonna start investing with our goals in mind.
Nope. I’m gonna hop on the next
hot thing. You know what’s crazy though? I. Is that every year DALBAR does a study called the quantitative Analysis of investor Behavior and Financial Advice. I mean, I guess anybody could buy it. I don’t know why you would buy this report if you weren’t gonna use it for education purposes, but generally speaking, they’ve been doing it a long time.
But generally speaking, the average investment, so out of all the equity investing, all the mutual funds, all the ETFs, all that sort of stuff, the average investment generally averages about 7.58%. That changes year to year, you know, as they have new data, but it’s about seven point half, 8% the average invest store, which is you were talking about at the very beginning, you know, the, the, the data scientists who went back through the decades of returns, they track inflows and outflows into those investments.
That was what Debar does. So they know that the average invest door gets 2.5%. So we’re Poo-pooing Kathy Woods, you know, arc thing going, ha ha, she lost all this money and she sucks. And so does, you know all the investors, but this is par for the course for the average investor all the time. Like the average investor gets two point a half percent all the time, yet the average investment is out there cranking away at seven point a half or eight.
And really the lesson here, I think what you’re getting at is just keep it simple. Invest the money. ─━ You know, put your head in the sand for 30 years. Like, like, like just pull a Warren Buffet, be like, when’s my Coke dividend again? Well, I
think about all the time you save and you can actually spend on the things that really matter, like the things that you wanna do with your life.
I. Versus trying to find the, the the thing. Uh, we’ve got a show coming up Doug, where we talk about nce de Leon. Mm-Hmm. And, you know, everybody’s searching for, you know, there’s the quest for the holy grail. There’s the quest for nce de Leon looking for the family. Youth. He
was the kicker for the dolphins.
Yes. Yes. It’s a tale as old as time. People as old as Ryan looking for the magic elixir. ── And we just keep, keep doing it. ─ If you would like to dive deeper into this, we have a great newsletter called the 2 0 1 stacky Benjamins dot com slash 2 0 1. Comes out the day after the show, so if you’re listening to it, uh, on Wednesday, you’re gonna get this tomorrow, listening to it later, probably in your email box right now, waiting for you where Kevin Bailey dives deeper into these topics, including.
By the way, we will have a link even in the show notes to a history that we did of index funds back on October 13th, 2021. Our researcher and writer, Robin Wrigglesworth came on the show and talked about how the index fund was created. And you may be surprised about the history of the index fund. So if you wanna know more about how that happened and how a lot of the current mythology we have around, uh, a guy named Jack Gel’s involvement. ─
You will be very surprised on what actually happened when the index fund came around. If you know somebody that needs to hear this episode, of course pass it along on Spotify, apple, wherever you listen to shows. Uh, we’re always happy to get new stackers and have them hopefully not step in it. Uh, speaking of, uh, step in it, our next, our next segment is we call the TikTok minute.
This is where a creator either steps in it or quote air quote steps in it. Um, actually, they either shine a light or they maybe air quote, shine a light. But, uh, OG do you think, uh, this creator’s going to shine a light man last week? Gary Vanerchuk. Remember that one? He’s shone a light.
It was hot. I played that for my mom.
I. It’s like, get off the bag, mom. ━━━━━━━━─━━
Forget about kids. ─── Get off. It was, if you’re over 22 years old and taking money from your parents, uh, stop taking the cash if you’re over
70 and taking money from your kids. That’s what I want know. That one. What’s
that one called? Stop complaining about your kid. Yes.
What’s this one? og. ━
Oh, this one’s air quotes for sure. No, it’s April Fool’s Week. You know, the solo eclipses in a couple days. It’s just mayhem. Everybody’s cray cray. ─
Well, this, uh, may or may not be a little cray. Ccra. This is a comedian standing on stage. I’ll tell you who in just a second. ────────
Um,
I’m nervous.
I left my phone back there. So, uh, it always looks out for me and, uh, ──── it thinks I’m an idiot. I think it thinks I’m an idiot, uh, because every, everyone, finally they get a call that says Scam. Likely on it on my phone, scam, likely. Like my phone doesn’t even trust me. ─━━━━ I picked it up one time. It was my brother.
It was wasn’t even a scam. It was just my brother calling to tell me he loves me. ── How crazy is that? ─────── I didn’t even know I had a brother and ━ oh my god. ━━━━ Next thing I know, we’re sharing all kinds of information with each other and. ━━━─── Talking about my finances. ────━ Oh God, I miss Hakeem man. ──━━━━━────
Hakeem, uh, Lachlan.
Patterson’s, uh, brother. Uh, I didn’t know Lachlan and Hakeem are, are names that generally come from the same family.
Yeah. You gotta see that guy to know His brother’s definitely not named Hakeem. No, ─
no. Just a wonderful comedy from Lachlan Patterson. If it’s your brother, OG Colin, you might wanna ask for Id first.
These days, have you heard about all the AI. Scams that are happening with phone calls. Oh, it could be your brother. Yeah. Or the voice of your brother. Sample. The
voice that’s terrifying with Kurt Long was just on the show, Kurt Long, uh, security expert talking about how crazy that is. He was back on episode 1488, ─── if you wanna hear how scary that is.
Yeah. If it sounds like Doug, heck, Doug’s not even really here today. ━━━─── We found we don’t gotta give them free donuts. We get to have all the donuts ourself. If we just make Doug ai,
I can’t remember if our guests talked about this or not, but they’re actually now saying, security experts are now saying ─ consider having a code word in your family ─ so that if you do get this call saying, dad, I’m being held hostage.
If that voice on the other end doesn’t say the code word. Pineapples. I know that means something different for you, og. Wow. Then ── it’s the first one he can think of. Pineapple. ───━ Then, uh, it, it may be a scam call ─ Doug
can’t figure out when he puts a pineapple in his cart upside down and walks around the grocery store.
Why? He gets all kinds of weird
looks. He get lots of attention.
He’s got, got no, no idea why life changing. ━ That took a right turn in a hurry. Well, let’s, ─ let’s move along. If you’ve got a TikTok minute, by the way. Thanks to Heather for sending that to us. If you’ve got, uh, TikTok minute, either brilliant or air quotes brilliant, send that to me, Joe at stacky Benjamins dot com.
Uh, coming up next, we’re gonna answer a call from help. Call from help. ─────────────
Maybe not a call from help. We’re gonna answer our call for help. How about that
from somebody who’s calling, we’re all in deep trouble. Like the one place we all go to get out, they’re calling us. ─────
That’s, that is, that’ll be a mind bender, A call for help from James. Who, uh, has a question, thought I better call sa See hi and og.
But before that, Doug, uh, you got a very interesting one today for us. Huh? This
one is, Hey there, stackers. I’m Joe’s mom’s neighbor, Doug. I was trimming Joe’s mom, Bush’s yesterday, and did such a good job. She asked me to finish up the rest of her gardening. I spent hours pulling weeds, planting flowers, moving rocks, and a couple of ladies even stopped over and asked if I needed any help moving a big bag of dirt.
They said it looked like I was really struggling with it. It’s ridiculous. Can’t believe they would. Why don’t they just come out and say they admire my gardening ability? Everybody likes watching me work the hose. No, nothing to No, no, ─ no. Okay. Well, anyway, enough of this. Yeah, thank you. On the trimming hedges.
Which brings me to today’s question, where does the term hedge fund come from? I’ll be back right after I trim my beard with these lawn shears. And who needs a razor Big
savings. ━━━━━━━━━━━━━━━━─━━───────────────━────────━─━━━━━━━━━━━━━━━━━━
Hey there, stackers. I’m Texarkana. Best gardener and probably the hottest man in the neighborhood. I mean, look at the competition. Not great. No. Come on. Joe’s mom’s neighbor, Doug. We’re right here. Yeah. Talking about you guys. We’re right here. Yeah. I know exactly where you are. We’re all familiar with what it means to hedge your bets, but what about hedging our funds?
Where does the term hedge fund come from? The answer in 1949, around the time when Joe was born, in fact, again, ─━ a journalist named Alfred Winslow Jones founded one of the first. Hedge funds his fund utilized short selling to hedge his stock portfolio against the drops in the market. His goal to make gains steadily in the portfolio and avoid losses, hence hedge.
Your bets became hedge fund. And now back to Joe and og. ────
I think we should hedge our bets on Doug’s trivia there, og. ─
Trust me, I’ve been doing this, been thinking about it for a long time. Hey, it’s time to answer. I always have an extra one just in case. ─━━─
It’s time to answer a call for help from a stacker who said, you know what?
I better call Saul. See, hi and og. Today’s call comes to us from James, by the way, if you wanna be like James, stack your Benjamins dot com slash voicemail. Gets you there and James left this voicemail for us. Hey man. ─━━───── Hi. This is James from New Hampshire, longtime fan of the show. I haven’t learned anything yet, but I’m still hopeful.
I wanted to know if you have any experience with ABLE Accounts A BLE. ─━ Appear, act kind of like a Roth. I ━ money be for
special needs. ───
I haven’t found a information ━━━━━━─━━━━━━━━━━━━━━━
in ── used for needs. ━──── Really appreciate it. I’m excited you guys are coming to Boston and we’ll see you then. Thanks. ─ Awesome. Yes, we are, uh, finalizing the place where we’re gonna be. I got some great leads on places and for everybody in the Boston area, we will be there. At least I will be there. Hopefully OG comes with me on Thursday, May 23rd.
See if I’m invited. You’re invited. We already invited you. I’m only not invited. Uh, I got my plane ticket. We are, you always
do stuff on stuff where I’m already got stuff going on. Can’t be like, oh, you’re invited. It happens to be the last day your kid’s school,
but sure, Doug, we could plan this like six years out.
And he’s like, oh, I’m busy. I, I told
you getting access to his calendar would work out for us,
Joe. Yes. Yeah. I got a toothache able looking. Exactly. This is a great topic, og. There are so many people. That these, uh, special accounts could help, but we don’t talk about ’em a lot because it is just a, a small segment of the overall stacker audience.
But great question James og. What’s an ABLE account?
You know, it’s funny that he said it’s kinda like an IRAI, I would think of it more as almost like a 5 29 plan. Yeah, me too. In terms of, you know, if I was gonna mentally kind of put it in a bucket, I would think of it more as a 5 29 plan. It’s a state level security type thing, like a 5 29.
So. 5 29 has, um, uh, has their foundation in a, in a particular state. Every state has one now, I think just about if there’s one or two that hasn’t, that’d be surprising. And there’s contribution limits in terms of total contributions, but each state’s gonna be different in how many, how much contributions they are.
Generally it’s for, uh, I think the age is 26. The age of which you have to be prior to diagnosis is 26. So if you have an injury or illness or, you know, whatever qualifies you for this, uh, disability has to have occurred prior to age 26. And, uh, it works just like a healthcare savings account of 5 29. It’s a reimbursement type plan.
Uh, you can invest money into it and it grows tax deferred. You take the money out tax free for use for eligible expenses. For that person. So it’s a super cool strategy and if you’ve got assets that you can set aside and you have the need for it, this is a great place for those assets to grow. Tax
deferred.
Yeah, I just pulled up all the expenses, uh, that are eligible so we don’t miss them. They have to be expenses related to the beneficiaries disability including education, housing, transportation, employment, training and support. Assistive technology, personal support services, health and financial management, legal fees and basic living expenses.
Just, just lots of things. And to your point, it’s funny, every uh, every piece that I pull up talking about this immediately, OG goes to what you’re talking about. Think 5 29 plan. ─ And you’ve got a very, very similar, uh, type of
account. The only asterisk that I’ll put on it is, uh, work with your attorney to make sure that you are still eligible for any.
Aid that exists in your state or community Because there are some restrictions in terms of assets that will. Restrict your ability for, for local aid or government aid of some kind. Think of it this way, if you had a hundred million dollars, you’re probably not gonna get the free transportation to your doctor.
That may be someone else who’s mm-Hmm. Who has less assets, might do that. Every state, every community’s got a little bit different benefits for folks that need help, but it matters in terms of how many assets you have. So. Just don’t go stuff a million bucks in this account or something, and then find out that the limit was 9 99 or whatever it is, you know, work with a planner, work with an attorney on this to make sure that you, that you do it right. ──
Eligibility for these, by the way, requires a diagnosis of quote, significant disability before H 26. You’ll wanna go to the IRS website will provide links in the show notes, uh, about what a significant disability is. But it’s, it’s before age 26 that, uh, that is, is the number. ─ To your point, og, much like a 5 29 plan.
You know, grandparents put money in a 5 29 plan. Other relatives, maybe relatives without children, put money in a 5 29 plan. Money can come from all kinds of different sources For this, in 2024, the, the total number is 18,000 from all different sources. So, to your point, you wanna watch out how much money you put in, but, but this isn’t just, you know. ──
Doug putting money into Doug’s plan. This is, we all put money into Doug’s plan.
Unlike a 5 29 though, um, pretty sure for able accounts you can only have one. I. Versus a 5 29. You know, you can have as
many as you want. And they are, they are established by the states, but I think that don’t most of the major, uh, fund companies offer able able
plans?
Yeah, they do now. Yep. Del of the world. Yeah.
Yep. Getting pretty ubiquitous out there. I. That’s fantastic. We will, we will have links in our show notes page at stack you Benjamins dot com. We’ll have even more commentary and sources for people that wanna dig even deeper into able accounts in tomorrow’s 2 0 1 stack you.
Benjamins dot com slash 2 0 1, which is our is our newsletter. It’s time to wander out to the back porch and Doug. I know we’ve been doing your, uh, movie reviews, but, but, or TV reviews. I still got more, but man, I got a big one though. I got one that I don’t wanna get away from because if people can see this one in the theater still and it’s gonna be close, I hope that they do.
So we’re gonna do the full experience here on, uh, this movie, which is called, uh, Cabrini. And by full
experience you mean you’re playing My favorite part, ── the trailer. ──
Yes.
Lots of thematic music, random explosions, and you’re supposed to exactly know what’s going on ─ in a world.
You said you’d never leave me, ━━━─
daddy.
No.
Daddy, ──────────────────────
I see ── South Korea. ───── Dear reader, ── retro ━──━━ New York is built upon the dead. ━───━━────────━━─━━━━━━━━━━━━━━━━━───━━━━━━━━━━━━━━━━━━━━━━━━
If I made you the first woman ever to lead an overseas mission, the whole world would look to you as
proof of what woman can, ── a can. I cannot accomplish. ━─────
That’s the voice of the Pope after they got a, uh, letter from the Pope. This is about a woman, mother Cabrini, who is a, uh, nun in Italy and runs a series of orphanages and she has this idea that she wants to go to China and open up a bunch of orphanages.
And of course you heard it the beginning, uh, New York Times writer talking about New York built on the dead because the Pope says. We don’t need help there. This is around 1900. We need help in America where a bunch of Italians are just fresh into New York City. Most of the Italian immigrants in New York City don’t speak any English, and there’s an.
Entire subculture, uh, in an area which is roughly where Chinatown is now called Five Points and is just, it’s so lawless in five points among the Italian immigrants that even the police won’t go there. And this is a time, by the way, there was a, there’s a great board game and by great, I mean one of the meanest fricking games we play called Tamy Hall.
Which is around this same timeframe, which is New York’s corrupt government. And the theme of this board game is immigrants show up in the United States and in the board game, they’re cubes. You are taking these different immigrants and you’re trying to control the immigrant populations to make them all vote for you and, and it is wheeling and dealing and backstabbing, and the immigrants are just pawns.
And from the beginning of this movie, when Mother Cabrini lands in the United States. It’s clear that nobody cares about the Italian people. Nobody care about, cares about these immigrants. Nobody cares about her. In fact, the arch, the Archbishop tells her to go home. The Pope sent her with a letter saying, we need you in the United States.
The archbishop goes, you’re not gonna do anything. You’re getting back on the boat. You’re going home, you, you are totally screwed. This is not gonna work. She’s a little tiny Italian woman, ── and this is a movie about a badass. Because Mother Cabrini is a fricking badass. The the movie is made by a new studio that just opened up in 2021 called Angel Studios, and I went and looked this up because I saw a couple other trailers for movies by them, which also looked phenomenal.
And the deal with Angel Studios is their goal is to make uplifting movies. That prove that we’re all more alike than different. And I immediately, when I read that, I’m like, I don’t want a fricking message movie. I don’t want, you know, uh, d Doug, we’ve talked about that, about movies in the past that you and I have watched where the theme is, so the, the creator had some message uhhuh and they wanted to shove it down our throat.
Yep. This studio does not do that. This studio just creates these. This movie is Rudy. If you liked the movie Rudy, and you felt uplifted and just excited and wanted to go meet the next challenge, Cabrini is that movie. I haven’t seen a movie I like this much in so long. I can’t, I can’t tell you how long it’s been.
Cheryl and I left the movie theater going that that’s a movie everybody needs to see. I don’t care who you are, I don’t care what your background is. Cabrini is just a phenomenal movie. There are very few people you’ve seen before in this movie. John Lithgo is in it. Uh, he plays the mayor who is the biggest hole on earth.
’cause of course, he’s just playing the political game. The woman play. Mother Cabrini is an actress that I had never seen before. She’s amazing. I just, the, the movie Cabrini. ─ There have been very few times I’ve walked out of a movie theater feeling as good as I did after I left that movie. I know
there’s a Cabrini order of nuns.
Does that mean that this is a true
story? This is a true story. Wow. About her, about her life, about her upbringing, and about her beginning this order. It is. It is amazing. It’s just an amazing
movie and you compared it to Rudy. So I think og we’re getting a good, you know, thread here. Joe likes anything having to do with the Catholic church. ━━
It might might be a kid that
grew up Catholic. Could very well, could very well be. Yeah, I didn’t think about that synapse firing. But I Cabrini. I think no matter who you are, you’re gonna really like this movie. ─ You guys both gotta see it. I don’t think either one of you will, but I’m hoping like hell you do Well.
So it’s tough. The theater near me very limited options. I don’t know if they’re gonna get it. It doesn’t sound, this is a story driven thing. It doesn’t sound visual, so probably okay, if I wait till it’s streaming, can I, can I do that or do I have to drive like an hour and a half to find it in the
theater? ────
I don’t know. I, I like every movie better in the theater. I’ve found that when I’ve disagreed vehemently with friends about movies. It’s because they get up during the good parts. You know, they get up just for a, a, a break. They, they stop watching. They, um, they’re distracted by other stuff in the room.
Like, I just, I just, I like the theater experience. So for me, going to see it in a movie where it’s just me in the film and I can experience it versus all this other crap going on. ─ Yeah, I mean, you do you. But, uh, this explains
why you loved Super Mario Brothers and the rest of the world hated it. ─━─── Don’t recall
seeing that one. ━───
The discussion I have over and over with, with friends, you know, in Texarkana is Shape of Water I the Academy Awards and I love Shape of Water. My entire friend group hated it. Oh, I kinda liked it.
I thought it was great. Guess I’m not in the friend group. I, I, ─━━──
oops, og. I let
that spill damn ── right across
the face.
We gotta distract him. Doug, what should we have, uh, what should be on our to-do list today? Well, Joe,
what’s on our to-do list? First, take some advice from our headline. Easier Strategy usually means better, and not just because you understand it. Second, take away from our TikTok minute. If your brother calls, maybe get some ID before sharing your financial information.
Maybe. So what’s the biggest to do ────── I need to take my gardening up a notch and learn how to become a topiary artist? Hold still. Oh gee. I’m still trying to make you into a shrub. ───────── This show is the property of SB podcasts, LLC, copyright 2024, and is created by Joe Saul-Sehy. Our producer is Karen. Repine.
Karen and Joe get help from a few of our neighborhood friends. You’ll find out about our awesome team at Stacking Benjamins dot com, along with the show notes and how you can find us on YouTube and all the usual social media spots. Come say hello. Oh yeah, and before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know.
This show is for entertainment purposes only before making any financial decisions. Speak with a real financial advisor. I’m Joe’s Mom’s neighbor, Duggan. We’ll see you next time back here at the Stacking Benjamin Show. ━━─━──━━─━━──────────────────────────────────
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