Make Investments Fit You (S4E3)

Tuesday, December 12th

Sheri and Kris Puzzle over the meaning of the Acronym ESG and answer Lindsey's question about money. How can you make an investment that fits your needs? 

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

In just a few moments Chris Caroline iron going to struggle with the acronym eat as sex GE. So we looked it up its environmental social and governance. Not goodness although you know goodness is also inside uses the word. Environmental social and governance and why are we talking about ESG. Because you can look at investments. Based on your ESG. String wound up. Environmental social and governments and Sherry lynch and Chris Carroll and we're trying to get our act together for this episode of her money to broadcast. Her money is sponsored by cure all financial. Hi this is handling that close financial advisor with Carol financial retirement may seem like a long way down the red but the Sunnis start the better off you'll be in the long run but you're starting a family. Buying your first hand or simply want some help figuring out where to start join us for our new simply saving series this fall at a Mecklenburg prairie on Tuesday October 24 at 530 while walking three easy ways to save and the things you should be doing to ensure here on track retirement. To register for complementary workshop please visit our website at Carol financial dot com it's Carol financing its retirement simple. We have a co. Ocean from her morning subscriber Chris Linn is seen bright wide search is doctoral candidate at Indiana University Bloomington. That's impressive and I have to say doctoral candidate. As she says hi Sherry Chris I love the pod cast my boyfriend and I listen to every episode and you've inspired us to get our finances in order. I have a question. I recently had a death in the family received a small amount of life insurance money it's not a ton of money it's a few thousand dollars and I could always use it for rent tutor. Other boring necessities. But I'd like to put it towards some socks my question is this how to use this money to its full potential. How do I get started as an investor. And how can I invest in something specific which for me would be renewable energy thanks Lindsay. That's really. That's really interesting set of questions because it's true that every once in awhile in your life. It money does come from the sky. And that's what this is this is money from pension haven't heard it yet. So let's talk about personal life insurance monies that taxable to the person receives it. And it's generally not taxable person your season the the exception is if an employee you're replies life insurance. For an employee. The proceeds can be taxable OK but if you're if you buy life insurance on. A family member or yourself when your spouse and you can't cash. The benefits or are not taxable. I'm less sure. Running up against a state tax issues which. That's for a lot of money don't pay a lot of money you talked about. So we've got Lindsey situation she's got a few thousand dollars and you know taxes are going to be due on mr. she doesn't have to worry about setting some persons of decide let's start with her first question. How do I get started as and then fast. Well he here's the thing. There are. And almost. Limitless number of opportunities and options for you out there it is really hard. To say this is the one right thing Rangers are cash. But I will tell you that a lot of experts myself included think that the first few thousand dollars that you want to invest. Do that you should put it into an index mutual fund something that is changing broadly diversified. And then. Plumes of a lot of stocks so what kind of thinker jukebox. It's obviously being guard has the 500 index it will lend. Let me back you up where we were I know we talked about it in the past but free define what you mean by the word index and mutual fund okay assume mutual funds basically either the poor money together. It is it is literally a company that exists only to invest the money put into it OK okay. So if I buy mutual fund. I'm pull my money with other investors money and that money is than giving invested in some underlying. Security which which I'm guessing it allows you as a smaller individual investors to play in the big leagues because your pooled with the group of disaster so soon. Yes you know and indexes simply. Someone. And an index to can mean a lot of things sun room to trying to hedge yourself little bit. But a company or person can come up with any number of indices indexes are okay. The thought S&P 500 index is just. Here are the 500 largest US based companies. Can sell an index mutual fund would only invest in those 5500 yards and and they lived and they would be in the percentages of the larger the company the larger the percent. Of the end acts peso Apple's biggest army in the world is the biggest. That's percent of the percentage of the index and so do you recommend that mom didn't newbie investors start with an index mutual fund because it's sort of I look safer more low risk. Well it's not just the disorder rescued students. Simple well diversified low cost us a lot of good things that'll come in that first investment. And and I think that. Which you don't wanna do usury you don't want your first investment to. Drive all the rest of your investments for the passion for life pray. So I mean I think it's a good place to start a good place assert paying attention and and to see which you know. Okay now. She also asked about. Specifically wanting to invest in renewable energy. Further such thing as mutual funds that. Target certain industries or are excludes certain to execute other investors who would never won an event. Stint tobacco phrasing assured there absolutely are so if you have strong. Police are strong opinions it's gonna take a little more research that you can't find funds that focus on. Just about anything that you want focus on. So if you wanna go out there and find a mutual fund that does nothing but invests in energy stocks you can do that if you wanna go out there and fund a mutual fund that invests and nothing but sold Porsche talks I think you can actually do that now. It's just gonna take a little more time. One I would tell you start by opening an account somewhere that's comfortable to you. Now there are a ton of different places you can open an account to lecture by phone through. All sorts of places. But you can open an account of fidelity have an account or Schwab you you know all do all this on line in minutes okay. I'm sure E*Trade. I'm sure there are ton of other ones if you just wanna turn on the TV and watch commercials for a while you you will be certified and so. But but then just too little bitter research into. What is it that you want to invest. Win your shorting out when it's the first few thousand dollars I would encourage you to still use a farmed just because you're giving diversification. You go into a fund in there and anywhere from maybe forty things that the low end to hundreds and hundreds of of securities at the high end. That diversification really does matter. So I wouldn't go on and say oh we no longer interest it and alternative energy and you know I found this little company that sounds great. If you can. Not put all your eggs in one basket. As this does that saying go yeah there's visionaries employ your eggs in one basket particularly if you're not a finance person because just because I just because something is a good idea does not make it a good investment. People really missed this point. I tried to drive it home to people whole lot so we had. We've had people call us and say oh. Drone technology is awesome I wanna invest in drones. Well you know that's all well and good but you know drone companies are either these massive companies that. Half a percent of their businesses and drones. Or their tiny companies and their privately held and who knows if Weyerhaeuser is gonna put them out of business and actually scrape okay. So just because something's agreed idea doesn't mean it's agreed investment. And if you're finance person. You have the ability to try to figure out the differences separate those two things if you're not a finance person just remember that. You know in nineteen Tony there were 250. Car companies in this country. Dot blows my mind when I need time anyone says Harry Reid that it stops me in my tracks and have to look at him again and go. How could surge didn't 250. Car. Released here and in the reason was he need two guys one of which was mechanically inclined and the other room which could sell some stock. Started a company in their garage to make cars. And it was expensive to get all the hard she needed to make your car or so who you started a company and sold stocks that you could get enough money together to build a couple of cars. And then sell them and then reinvest in the next couple cars carrying. And you know yes there were hundreds of car companies out there and the car was the next big thing. But unless you invested in GM can work for our order for any news or hair short list. Of the ones that worked out and all the rest of them went bankrupt. It's interesting you know when you said on a good ideas not necessarily good investment and my mind to started racing because. I think of how many things in my own life that I have been so enthusiastic about the just seemed like the best idea ever. And they are for the and you serve by your brain that's your emotions and your enthusiasm run away with fewer ability to be analytical. Yeah absolutely. We are emotional people by nature who prey yeah lasso I thought Lindsay is he knows great. She puts you right in there this renewable energy that seems like something she cares about it. I know it's something my wife cares about it it's more about caring about renewable energy than it is about. I think I'm gonna make a lot of money on renewable. I suppose it's possible that Lindsay like your wife would say well it's not I wanna supportive because if people don't care about it don't invest in it than it has no hope. Aunt and then the other side of because it's capitalism still yeah the other person is going lady I'm here to make money like I can't you know. I've got to bet on the horse it's gonna win this is always a challenge isn't it. It is there's there's a balancing act here but we'll tell you that Morningstar which is a company that does research on mutual funds. They give every mutual fund score now and he SG. So if you care about the social impact I turned on them to Morningstar rating yeah yeah so they eat they actually give the SG scores now are so few moments and what does he does she mean environmental. Social. Good dish. And she's probably not for good marine that's all right. Who need. Obama kick kicker and a little oil off our grew at an arts and then I am Lindsay is email reminding me of a question that another prom. And Herman you listener asked me and that was. Why do some people. Put things in public they have like a big life insurance policy or whatever and they put everything they own including their house into a trust. Why is that a rich people thing to do is third good reason to do that should I do that. Should juju that OK so. Conceptually. What they're doing is they're trying to avoid probate. So when you die. Proving it is the exit fusion of your bills OK if you put things into trust before you die they do not go through. Through. And why is we want to avoid probate. Well they can be expensive it can be time consuming. And in the end it's public information so they will try to convince very wealthy people that they should avoid probate so that no one knows how much money they actually cast. I thought oh. Well that's interesting isn't it. So but then there's no link emotional highly charged reading of the will in the lawyer's office where you find out that daddy dissuading you from marrying that piece of trash sport for a funeral ceremony you're evil stepmother Ryan and that doesn't have friends of the trust just does whatever it does it once did because I am this this person's email was really detailed once you do that in you living your house sits at the house is actually owned by a trust not by you. Does that give you extra special protections why you're still alive and living in this. Trust Jerome Roth. Kind of good your house is through all protected anyway to your house and your retirement funds are very hard to come after legally. I only does the trust give you extra protection and yes on paper but in practice. Most judges are gonna take away your house or your retirement savings. Thanks so tell the truth is this something rich people do discuss this is a rich people thing to do another rich people do is so you have really arrived until. But you cannot have put the house and trucks for his own work is very. I'm gonna say something slightly less popular okay or something attorneys made a whole lot of money to do. Seriously he's so. We talked about incentives. On this show before casting Nobel Prize winning a kind. Imus asks is halo movie so oops attorneys might have a strong incentives to. So you on the idea of trust. Or multiple trust storm putting everything urine into a trust someone told me once that a few have everything you own your trust and somebody searches for you like in the Arab. Tax records. To see what you pay for your house you don't show up the trash shows up. Correct service or your Social Security number can become virtually meaningless. If not all of your assets are in the trust is he trusts would have a separate. So shall also. A separate tax identification number but most people and they set up trust they set up while there are a lot of this so reporter called revoke Coble trust sure what you what we call road trust my you still use your sort of security numbers are still show often use somebody were to look cute. Does that give you any additional protection against dollar credit fraud or identity theft if you have everything you know return not. Earlier rev trusts or revoke more trust means that you can so change you are your lives. It's not really a separate entity from here so it's still this kind of issue. It's stuff you after you die it becomes its cult and you're remarkable trust and irrevocable trust is as separate entity has its own tax identification number. And their are their are. There is a separation between that that in to tee and the people that is there to help OK so the next generation maybe you'll reap some benefits. And what is it is a rev trust the same thing as a living trust. Is just a different name for there's about there's probably ten different camps fur on. Her vote will trust for the three people listening who may be trust. Son baby Lisa. Well that even mean record mean to be is that we're talking about the next generators and incineration due to trust and that trust you get like a paycheck person confirmed mistrust has. Opens ought to trust says the trust is the separate entities set up by your parents in this case or maybe your grandparents trade and they set the rules. So they can make the rules were they wanted to make the rules and then there's a person called a trustee. That person's job is sort of do what. With the trucks doesn't make the decisions. On the way. Is this what happens you'll hear about this every once in awhile typically it'll be calm someone very wealthy or of some famous celebrity where. The indie kids don't inherit. All it wants to pray pray they get a waiver that it's 25 in May began thirty than me before here whenever that's what that is seen usually you can't do that was a regular well. Correct. So so the trust still allows you to control some things from beyond the grave moves into the there are a couple of drawbacks the first shot like is expensive to setup. Thumb thing you know it depends on and the more complicated trust your talking about a half. Five digit number to get to trust some up and removed Marleau who live in the first choice. They're really complicated in my view sixers number. So it's expensive to get and also off the bottom allows you control your money after your not around anymore you know we'll vote the thing I tell people those you know continue we here in your doctor you know. She grew even if you think you're controlling it from beyond thicker. Not a lot of your conversations about this over the years deceased have a very complex strut setup in case she died my parents' money because. The truth is that that he knew that I was going to be mass. You know we're not. When I was a teenager mean I'm sure you can look at your kids you know like I do not wanna know what these kids would do if they have all the money and nothing Smart or not parents rights. You can set up for very complicated trust with them. You know hopefully tenure Chenault. You know and conserve my dad no longer has trust and data world. Slept on the back and said yeah. Not nearly half passes appears so Britain's got. Just saw it about this serial load and he says he said I would sit down to try to ride out these rules for the trust in what I and kept realizing is that like I would figure out ways to go around them. And if I figured out a way to go around the rule than you would figure out where to go around rumor about a washer while lawyer who had the first place so. Well let's let's go all the way would still won eighty the other side kestre people who die with our. A will of mankind hello Willis for everyone tour false. If you own property. And have gambling you should have a will. You clearly. Saw and what happens if you don't if you don't have a. Will let's call dying in terrorist state. Without a well OK okay hum. Every state has different rules for what happens if you die without a will lease in test state rules. And some of the rules in some states make absolutely no sense or give you an example. If I die in and South Carolina. My property get loose. 50% to my wife 50% of my kids first. What if my kids are. Five and eight years old and now they've got half of your property yeah so are your two kids. They get half myself split between Imus Tony 5% in my property each in their five NAR. How do you even begin and now I've just made it more complicated right it's much more complicated than if everything just went to my wife is and it. Yeah okay we actually had a client this is awhile back got a client whose husband died very young but her kids were of age circuits were. I wanna see Tony in 23 years old. Her husband died with no will in South Carolina. They were in the house 5050. OK so her husband to whom 50% of the house when he died at 50%. Of his 50%. Went to her. So now she earned 75%. Of the house who owns the other 25 pursues a kid should kids. What's she gonna do she's gonna buy her room howls from her purse strings children young OK I'm see a man now. And that is a weird a medal yes it's a weird New York ID it exactly but what I'm telling you is do not die in domestic. You would think it's really simple it's really not an end as soon as you have any amount of assets it gets more complicated. And if you have a child. There's no question you have to have a would you have to have will if you have a choice give kids because if you have a child. Do you want the state deciding who's gonna raise your kid. Only you that's what's gonna happen if there's not a will cure your trusting the judge to decide who's gonna reassure kids and you may think. Oh no problem my mom would raise. Our kids because my mom is awesome. Vote what she didn't think about was the fact that the state since your kids your brother in laws because he's the one news the closest to the right age to parent or some thing. In your brother in laws you know bridges and I'm not easy he gives you received due out every time this year array or whatever you know you wanna like Irish and your kids from the millionaire the state do you want the state to decide. Well since we're on the subject one of the things that's been in the news a lot lately is the idea of this is death tax or this on your inheritance tax and first of all is a death tax the same as in yeah the same thing. And what I'm consumer I'm confused about his wire like a regular everyday people why were all tied up in knots about this so called death tax it doesn't apply. A regular everyday people now really does unless I'm confused and and it really doesn't it's it's that this year's exemption is five point 45 million dollar together. And I probably had. Is not an everyday folks got a problem although we'll say that's different states have different rules than some states have death taxes at a much lower levels. I want to say that Minnesota as it happens and about two million dollars. And so of ten million dollars or eleven. Even so this is not linked to run and every at a tax is not making it possible for you to buy fancy your groceries well and that's part of the problem is. A lot of people get upset about the death tax of the inheritance tax because. Dig dear you can make an argument to do some unfair tax you're taxing money that has already been taxed crack with the other side of it is. He really doesn't affect that many people. Now some people bring up what about this fall small family business the family far more of them form the business is worth more than non. The taxing beer real pain yes they're right. I will say there aren't that many small family farms anymore their mercy either gigantic farms or tiny farms and these days. Thumb but you know they have a point. They have a point and maybe it's not a fair tax is it's been tax more than once but. So a lot of money in stocks more than once I'm not sure that's a very strong argument. So here's arm confuse a master question so. You've gut yet the fact you've got your family farm that Chris is farm and crisp passes away and leaves in the state of five million dollars and well why is the family farm getting all of the involved and that that's your money not as they are you separate from the business. No my ownership of the business to be part of five million dollars. So what OK what if I only had a million dollars sitting in the bank and the rest and was an equity in the end of ten million dollar family farm or something grain. Well now we are come up with all these taxes to pay because it is the thing about the Daimler might pleas at these first margulies stats for gods that the thing about the taxes are high attack tree roots 45% of the amount over that. So you know while it doesn't affect that many people. It's a pretty big tax when you added on top of the US this morning's already been topics. Guiding on that makes when you explained it that way that makes more sense yak is because the old argument was you don't want. The next generation to sell family farm pay the taxes. And speaking of taxes is there and he. Thumb my historical data to support the idea that tax cuts. Somehow our own juice up the economy that trickle down economics I never there's data that supports the only shot down the works in my house I get a bonus like you to grow jobs get their nails done so yet the dock soon and there's no data is there and gossiping there are no replies I don't. Yes there's nothing there's no data that do it should lose that changing personal tax rates. Has any effect. Okay there is there is some data that says loads countries with lower corporate tax rates. Experienced faster economic growth that makes sense from a company I'm gonna build a factory. That I have a choice between two countries. I'm likely to build him one that has lower corporate power traits OK so that makes sense you know they were grew slightly faster. But it's a pretty small I mean we're we're not harm a big numbers here were there is evidence of that. There's really not evidence that changing personal attack trees has any. Identifiable. Fact on the overall we com. I'm so why are we so obsessed with it is this part of that behavioral economics Jeff may be you know one of the interesting things about tax cuts is every time they happened there winners and losers. And didn't its dare you rear that this tax cut is. Great for every war or bad for everyone any change in the code usually there are winners and losers. And so which did she give approach people who wanna argue about. Who should be the winner Prater who should be the loose her in a tax cut. You know I think it. It's just politically it's it's more political game than anything else and and I think it's it's silly be caught off and that ultimately. You are there people that people are gonna argue for what benefits them the most. And and there is though there is some sign that if we for companies that are you located here in the US that aren't thinking about building here if they had a lower corporate tax rate does that help the economies are Samantha I think. There are so good that there's there is evidence that lower corporate tax rates will boost your company. So I mean if you if we either would there's a lot of discussion a dropper corporate taxes from 35% so torn your 15%. I think it is legitimate that that would help our economy in the coming years. And can we sustain that on do we can we pay our bills can't pay our bills now since. This current. And admittedly we get we get so hung up do like him we really afford to cut corporate taxes from 35% of its like that implies that we have the money to pay for the stuff we do now we just do it we. Yeah we talked about is how this works the government doesn't follow realize all match. You know those the money's all just sort of imaginary anyway and I'm not in a sick had a tongue in cheek because I realize we cannot spend an infant and now forever. But. Truthfully as long as our country continues to grow and produce enough stuff. For all of us. Where are you the boom ever comes do so to speak. And isn't it can't gets kicked down on any he had hit somebody else's ground or never users is door to collect got you. Is that where does that. From us sources. No armed quietest she did think about Guido this is why we don't recommend loan sharking here at her money if they do come to collect. Yeah always come to load charged in the government they get paid for PS always always well I hope we answered your question Lindsay that's index mutual fund and by the way you should be subscribing decreases. On some newsletter go to Carol financial dot com Chris for seven newsletter every week cracking most weeks this is just sits. Every month at least but it truly screws to become a bimonthly publication. And plus you you occasionally get a clue into her money out the statistics to hang cartoons he never love cartoons you never know so that's Carol financial CA RR OLL financial dot com and he should be getting Chris is excellent news letter that's different today's episode. I'm Hermione the podcast thanks so much for downloading. Hate if you want more information about what we talked about on today's show or if you just have other questions about money. Is our website it's WWW Doug Carol financial dot com. Or you can only should mean email whether it's through the podcast or through my website I'd be happy to help if I can't curb money is sponsored. Like kuril financial. Hi this is in financial financial advisor with Carol financial retirement may seem like a long way down the red but Cassini start the better off you'll be in the long run. But you're starting a family. Buying your first ten or simply want some help figuring out where to start join us for our new simply saving series this fall at a Mecklenburg prairie on Tuesday October 24 at 530 Slovakia three easy ways to say in things you should be doing to ensure you're on track for retirement. To register for complementary workshop please visit our website at Carol financial of that kind it's Carol finance its retirement simple. Her mind my guess is hosted by me Sherry lynch and meet Chris Carroll. Our executive producers or new trial but. 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