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End of Year Portfolio

End of Year Portfolio

Find out what you should be focusing on in your end of year portfolio!


Matt: 00:00

Honey, have we done everything wrong as we approach the end of the year? I’m Matt Robison, and I’m with Mike Morton. This is financial life planning the whiteboard and podcast, which is also broadcast on WKXL radio. And as always, I’m your host, and Mike Morton is my guest on his show, it gets so weird.

Mike: 00:20

So weird.

Matt: 00:21

So we are talking today, we’re recording this full disclosure to our listeners, because this will hopefully have a long shelf life. I think this discussion is actually relevant at any time, but it’s especially relevant right now. We’re approaching the end of the year and like with all things, you have a few to do items. And you might over the course of the year have gotten your whole investing life just a little bit out of whack. So Mike, you’re here to tell people as we approach the end of the year, what are you doing with your clients to provide a little end of year cleaning?

Mike: 00:57

I was gonna say sprinkler… the new intro you just launched right into it’s not welcoming to the name.

Matt: 01:03

No, like get right into the kids these days, they watch tik-toks. If you have if you wait more than 15 seconds to tell them what they’re about to get…

Mike: 01:14

It’s usually like three, three seconds.

Matt: 01:18

This show is also a hot dance craze. And if you watch the video version, Mike is going to do a creative dance, balancing your portfolio.

Mike: 01:26

And why do I even let you onto my show Matt? I’m not even sure why you’re here.

Matt: 01:31

Because it’s my show. That’s the dirty little secret. All right. In all somewhat seriousness, is that really a thing that like, right now at the end of the year, you have to tell people hey, time to check in on a few things and make sure you haven’t gotten out of battle.

Mike: 01:45

There’s definitely end of year planning for financial planners, there’s definitely a few things to touch on. Because there’s a calendar year the IRS has some issues that happened like throughout the calendar year. So you have to do things during the calendar year. But today’s topic is a portfolio overview/review. And I think it’s another thing that you can put at the end of the year, if you haven’t checked on your portfolio, which I’m sure you have this year. But if you haven’t met, we just went over this Matt does not watch the markets and he doesn’t check in on his portfolio or anything. But for those of you out here out there who do this is just a good time of year to review that. And if you haven’t like Matt, we’ll go over what maybe you should be doing at least once a year.

Matt: 02:26

I treat my investments, like those unboxing videos that are super popular for no frickin reason at all. I’m like, people like to watch other people open box. Hey, look, what I got in here. That’s the way I like to treat my investments is hey, when I retire, I’ll find out what’s in there. And if it’s something, I’ll love myself a little bit. So but you’re saying that I actually should do like a little sneak peek inside?

Mike: 02:50

Yeah, you should to be honest. So first off the bat, I might let you off the hook. Matt, do you have to check your portfolio and rebalance? I would argue you should at least know what your portfolio generally is and I’m guessing that you generally know what’s in there. But I will say this. And so the second part is do you have to rebalance or tweak things? No, you don’t have to. If you’re pretty comfortable with where things are and they’re in a good place for you wherever you are in your journey, then fantastic. You don’t have to rebalance. But I will say this Matt, you should look at your overall portfolio. Everyone that has ever come and worked with me has never given me all their accounts all at once in one pie chart and said here Mike, I’ve already compiled all my accounts and all my investments and I know exactly what the breakdown is across these 12 different accounts. And so that’s a really good exercise here at the end of the year that you should gather all your investment accounts, your 401K’s, your IRAs, your brokerage accounts, 10, 12, 15 different types of accounts and put them into one pie chart so that you know how much cash and stocks and bonds and is it the right allocation for where you are.

Matt: 03:58

This reminds me just to give a little shout out to one of my favorite episodes that we’ve done together is Do I have too many accounts? And it’s just a fact of modern day work life that you work at a job maybe you’re fortunate enough that they have a 401 K and so you know you have that account, then you get another job because it’s an average of something like eight job switches in a career these days. So you get another job there’s another one you go to college I’ve got a student loan I got to maintain that account. There they all passwords by the way. We should do a show just on why you need a password manager. Another thing on my massive to do list.

Mike: 04:34

Oh you need a password manager Matt, absolutely.

Matt: 04:37

Oh thanks. Thanks. This is why people come to you is to tell you like to hear all the things that you should be doing. Let me guess I should not be eating lard for breakfast. Thanks, Mom.

Mike: 04:49

Lard for breakfast? All I know is I’m not coming to your house for breakfast.

Matt: 05:00

See, we’re way off. But, that is a hard, that is a hard thing to do. But I see your point, if I really sat down, I do actually have a system where I at least know what all my accounts are. And I know how to log into them. And I could probably with about 10 to 15 minutes of diligent effort, find out where everything stands today. And what you’re saying is, I should at least do that.

Mike: 05:26

So that’s what we’re gonna do, Matt. So you just told me 10 or 15 minutes. Great. So next time, we record, we’re gonna do a short segment on Matt’s breakdown of cash stocks and bonds I want to sell you’re gonna break down.

Matt: 05:53

that’s breakdown that he looks into his accounts and comes out crying. And it turns out this is now a solo podcast from here on out.

Mike: 05:54

You know, I will. It’s funny, actually, you mentioned password managers. That’s now part of my checklists for all my clients, you should have a password manager. So that could be a separate topic for some time. But yeah, I’m a big fan of password managers. I think everyone should have some, especially if you’re in a relationship, where you and a partner have shared accounts. So anyway, that’s an aside. The other thing is that you’d be surprised how many people come in to me and say, oh, yeah, I do have some account and I don’t have access to it. Everyone wants it, oh, yeah, I had this account. It’s got about $50,000 in it. I’m not sure where it is I’ll track that.

Matt: 06:37

This is the Dude Where’s My Car of financial play, by the way, just to put my brother in law on blast for a second. Sorry, man. This actually happened to me. He like lost a car. He couldn’t remember where his car was for like months. They are a two car family. And they’re just like, where’s my car? I don’t know. No, but this is actually quite possible. And we joke, but I’m beginning to come around to your point of view that at the very least, you could find because we’ve had such a volatile 2022, you could find that you might have done things. Well, you might have tried to diversify early in the year, but things could have gotten inadvertently out of balance, or your priorities might have changed. And you just might not have thought about it. The last time you did this exercise, you could have had different life circumstances. Now that you mentioned all of this, I’m beginning to see the wisdom of just doing a little checkup to see maybe, maybe you did have a kid, the last time you did this exercise. Maybe you had a different job. The last time you had this exercise, this actually makes a lot of sense to me.

Mike: 07:48

Suddenly, we’ve got a kid a little bit, it was around, maybe you had two cars, the last two cars, now you’ve got one? No, it is it’s a great exercise. A lot of the things that we work on are to build awareness. This is another thing I do at the beginning of the year. And we’ll have an episode on this in a few months, which is looking backward on what you spent money on. And it’s to build awareness to say you should just know these things. And if it’s Matt, it’s great to hear it take you 10 or 15 minutes to do that, because I expect many of the listeners might take an hour or two. That’s not realistic. Let’s be clear of these things. But it’s like I think it’s worth it to spend a couple of hours once a year to just build some awareness. Oh, wow, I am 90% invested in stocks? Oh, that’s good. I actually still have a 20 year time horizon. That’s good. I should be heavily invested for the long run. So I like that. Or oh gosh, when I add in my checking and savings accounts, which has grown, I haven’t been investing automatically. It’s just I’ve been saving them a good saver that’s really ballooned a little bit. And it turns out, there’s some cash sitting around in my IRAs, I forgot to invest that. Now I’ve got like 20 or 30% sitting and that’s not good. If I had that, if I’m still working, I have that long time horizon. So it’s really good to look at the overall portfolio across all your accounts. So definitely recommend at least starting there. Are you ready to create your ideal lifestyle? Let’s discover what’s most important to you and design a plan to have more of that in your life. Go to meet Mike All one word, meet Mike

Matt: 09:23

Boy, this is like a fractal to you. The further down you drill, the more detail I’m finding down here because now that you say all this, it occurs to me. I worked for the federal government up up through about 12 years ago. And the federal government 401k is called the Thrift Savings Plan. And I did an initial allocation of where I wanted those investments to go probably about 20 years ago. And it’s now occurring to me that I have not looked at what that allocation is probably since then, and that’s maybe not so great and I did actually ask a financial advisor at one point, Hey, should I consolidate that account? And he said, No, don’t worry about it, it’s doing well. It’s very low cost, leave it, it’s fine. But it does occur to me that because of the differential rates, that various sectors may have been growing or contracting, when I plug that in and take a look at my overall portfolio, I could be misaligned in where I am in kind of my, I’m going to use a vomitus word here my life journey, meaning I’m increasingly old sounds like an adventure I call life journey, or the cynical way of looking at it. I’m at the looming sunset phase of my life. It’s a beautiful sunset away.

Mike: 10:43

Does that mean we’re almost at the end?

Matt: 10:47

Your glass half full, there are some people who are glass half empty. I’m glass half full of poison. So no, I’m beginning to see exactly what you mean.

Mike: 10:55

Yeah. And I think it also reminds you if you’re a younger listener, or even middle of your career, we’re often too conservative. I like the way you said that I had this account from 12 years ago, I don’t even know what’s in there. And my guess is, it’s a typical kind of 80%, stocks, 20% bonds. And really, when you’re young, if you’re in your 20s 30s, even 40s, you can be almost 100% stocks, because to your point, Matt, think of that account, you were in your 20s and 30s, adding to that account, and you haven’t even checked it in 12 years, it would have been best, it would have done the best if it was 100% invested in stocks over the over that time horizon. And so it reminds you for all those younger listeners still starting to grow your portfolio. Or if you have a 20 year time horizon, we can be more aggressive than you think. And each of these accounts is typically set up and I do the same with my clients. I’m a little bit conservative, right? Because, hey, I don’t want you to lose money. I don’t want it to crash, even though I know the markets go up and down. And so they’re typically these target date funds have 10, 20, 30% bonds and cash in them. And if you’re in your 20s 30s, and 40s, you don’t really need any of that.

Matt: 11:59

All right, let’s eat the elephant here. The old thing, how do you eat an elephant one bite at a time? I think the problem with all of this is oh my gosh, where do you start? It’s all a giant pain. Because for each one of these things, if you don’t know how to access the account, you got to go through 50 steps to do that. If you do you got to look up, you got to log in maybe anyway. Yeah, so let’s just operationalize this for a second. What is step one? Is it literally to do this census and just open everything, find out what everything is and write it all down?

Mike: 12:32

You got it. Yeah, let’s start with just listing all your accounts and the values and the debts as well as assets. Yeah, let’s go ahead and get everything in this episode. I’m really just talking to assets. Okay, so we can go the other side. But let’s just talk about assets, in fact, not all your assets, just your investable assets. So just your checking, savings, brokerage accounts, 401K’s, IRAs, that kind of all those where there’s actual money that you can invest HSAs, health savings accounts, 529 accounts, or anything where you’ve got some money sitting in an account that you should have some kind of login to, let’s go ahead and list those. Hopefully, you can do that pretty quickly pen and paper or a little Excel spreadsheet. Okay, then let’s take it a step further. If you’re comfortable with that, or you got that, let’s use some software to start pulling together that pie chart. Now this is where I’m a little bit short on recommendations. I know I’d used in the past Personal Capital was one where you can pull together all your accounts, I’m sure there’s other good ones out there. I think even like Mint, which is a budgeting software might be able to help you like your investable accounts, you can put in fidelity or Schwab or Vanguard, and it’ll pull that information and gets you a good look. But if you can get some software that gives you that nice big pie chart across those 12 accounts, that’s a great step as well. So I would start there. And to your point, like if you come across some accounts that you’re missing the login or you don’t have access, you don’t know that balance, that’s great. That’s that’s discovery, right? That’s Hey, I got to track this down. Now, you don’t have to track it down. Literally right now we don’t have to spend four hours on ones making a bunch of phone calls, trying to figure it out just right and say oh my gosh, I have this account somewhere. I really need to track this down. Now you’re aware of it. Now. you know it’s out there. And you got to get that login, right or whatever it is.

Matt: 14:12

And that does go to the kind of elephant eating exercise what I like to do and about four or five years ago, I had to go through a process of trying to rationalize things just a little bit. And I really did break it down into it’s another aphorism that I’m really fond of one job at a time, every job has success. And so I find that if I can break this down into hey, look, we’re approaching the end of the year. But it’s not like I see your point about the IRS does have annual tasks that you need to do. So some of this is time driven. But if you discover that you’ve got an account out there and it’s this really should be rolled like a 401k should be rolled over to an IRA. And believe me they do not make this easy. It’s like trying to quit the gym. Yep, it’s okay, what you can do is you can work with someone like Mike or you can do a little work on your own. And you can figure out like, how do I break this down into steps that will take me 15 to 30 minutes. And I’m going to do one per week. And that’s literally how I accomplished one rollover a few years ago. And it took me a few months, and I just I broke it into, because then they needed a new form to send that anyway. And then I had to make a phone call. It’s like, alright, this week, I’m making the phone call. That’s what’s gonna happen. And low and behold, it got done.

Mike: 15:29

Yep. Yeah, that’s exactly right. And unfortunately, it’s not easy, because they like to have your money they don’t want you to roll it over somewhere else. But yeah, you just gotta figure that out. So first, just create the sheet, then if you can use some software get together a big pie chart just to build awareness. Okay, well, we’re just looking at what that is. The other thing I would say, for an action item, now, Matt, would be getting your cash somewhere where it’s making some interest. So if you literally have cash in your checking or savings, for the last four years, I’ve been like, just leave it there, you can’t earn money on that safe money, if you don’t want it to go down, potentially go down in value, there was nowhere to go and get interest on your money. So any checking account, any savings account, it really didn’t matter. Now, fortunately, we’re in an environment that you can get three or 4% interest on your money and not lose any principal. Okay, so if you’re in a checking or savings account, and you look if you have 10,000 or 20,000 and that’s your working cash, great, of course, leave it there, it’s coming in and out direct deposit, you’re paying off your credit cards and stuff like that. But if you have an emergency fund of $20,000, or if you have in your brokerage account, some of that cash and bond allocation to keep things nice and steady, you should be getting 3, 4 or 5% on that money. All right, so you can get this money market funds, you can get these in short term CDs, you can get these in ultra short term Treasury ETFs. There’s a couple of different ways of doing this. But if you have some cash, make sure that you’re getting three or four or five percent on that money.

Matt: 17:03

That’s a really great homework assignment for everyone right now. And we’ve just got like 45 seconds left in the show, so just to summarize here, step one do that census. Step two, do the work on the individual accounts. If you find those nits and gnats, pick through them and start parsing it out into doable, digestible tasks. And step three, and this is a good one, no matter what you’re saying right now, while you can get interest of 3% or 4%, if you’ve got money in cash, get that over into one of those vehicles that you just listed off. And that’ll earn you a little bit of money. And if you’ve accomplished nothing else, that’s valuable stuff.

Mike: 17:43

Yeah, there’s a few hundred bucks a year potentially thousands of dollars a year just by taking a few minutes of your time making sure that your cash is working for you.

Matt: 17:51

Mike Morton financial advice. Thanks so much.

Mike: 17:52

Thanks, Matt. Thanks for joining us on financial planning for entrepreneurs. If you liked what you heard, please subscribe to and rate the podcasts on Apple, iTunes, Google Play Spotify, or wherever you get your podcasts. You can connect with me at LinkedIn for Morton financial I’d love to get your feedback. If you have a comment or question, please email me at financial planning . Until next time, thanks for tuning in. This recording is for informational purposes only and should not be considered for investment advice or opinions expressed as our of the date of recording. Such opinions are subject to change. We do not guarantee the accuracy or completeness of the data presented here.

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