to the Financial Rockstar Show. I'm your host, Scott Alan Turner, ready to help you get out
of debt, save more money and retire early. In the studio with me is Producer Katie, who
is starting her own website.
Details to come. On the show today I'll be answering your questions
about money, business and life. If you have a question you would like answered on the
show, visit goaskscott.Com to leave me a voicemail. October: This is one of the peculiarly
dangerous months to speculate in stocks.
The others are July, January, September, April,
November, May, March, June, December, August and February. Famous quote from Mark Twain.
I'm a bit of a pack-rat with my paperwork primarily because it takes so little space
to store. You throw it in a box, stick it in the closet,
attic, wherever. I have all my old tax returns, all my old stock trades, a lot of important
pieces of information that I've hung onto over the years.
Lo and behold, I have all
my old stock picks from back in the day. My buys, my sells, the costs, the dates. Let
me tell you about some of the companies I. Used to invest in.
Caterpillar does the big
Tonka trucks, the earth movers. Cisco, they run the internet. General Motors, you're familiar
with them. Sears.
We all know what Sears is. E-Trade. Yeah, you could actually invest in
E-Trade. I don't know if you still can or not.
Goodyear make tires, and some others
I'll share with you in a second. Here's a buffoon move when I was going back
to these. I wish I could go back and ask myself, "What were you thinking?" I bought $3,000
of Home Depot stock on a March 1st. I sold it on March 17th.
Then I turned around and
bought it again on May 5th and sold all again two years later for total loss of about $800
including the trading fees. That is insane. I have no idea. I do have an idea why I did
that.
I was essentially day-trading, trying to time the market and thinking I knew what
was going to go on with Home Depot. I enjoy this exercise. Excited to go back and I went
through each of my stocks. I'm not going to list them all because it was a bunch, and
I compared, what would have happened if I.
Had bought those stocks and just held onto
them to today if I compare that to what the overall market did? All right. Let's see a few. Home Depot, and these are
all dates from the year 2000. Home Depot then, $64 a share.
Today, $131 a share. That sounds
pretty good. Caterpillar, $17 a share back then. Today, $71 a share.
Also pretty good.
How about General Motors, $93 a share. They went bankrupt 2009 so that went to zero. Not
so good. How about Sears, $15 a share back then.
Today, $11. Cisco, $77 a share back
then. Today, $26. That's not good.
Yahoo, $85 a share back then. Today, $37. How about
human genome sciences? I don't even know what they do. How much do you think I know about
the human genome? How much do you know about the human genome? How much does anyone know
about the human genome? Unless you have a PhD in genetics, you don't.
I have no idea
why I would have ever bought this stock. Again, I do know because I was day-trading. I got
some paperwork here for a second. The losses I made back then.
Home Depot bought $3,000
worth, sold it 2,200. I lost $800 there. How about Intel, the maker of computer chips.
I bought it for $5,500 and sold it for $2,500, nice $3,000 loss there. Brilliant.
EMC, my
goodness, bought that for $3,000 sold it for $300 so I lost $2,700 there. They were a tech
company. Oracle, largest software company in the world behind Microsoft. Again, $3,000
purchased, sold it for $700.
Nice $2,300 loss. Cisco, $3,000 bought it for. Sold it for 700.
Lost $2,300 there. Yahoo, bought it for $3,000, sold it and netted $374, $2,600 loss there.
Nokia, the maker of cellphones, $3,000 sold it, got $700, lost another $2,300.
Then here's
the funniest one. At a company called MC Data. I have no idea what they did. I owned one
share, make sense and based on the commissions of the share I actually netted $-3.75.
I plugged
some of this data into a spreadsheet and if I just look at Home Depot, Caterpillar, General
Motors, Sears, Cisco and Yahoo just the money I put in those. Actually, I just used a thousand dollars each
was the number that I used just for comparison to the overall stock market. If I put a thousand
dollars in each of those six companies compared to if I just bought a low cost index fund
I would have come out $700 ahead in the index fund just with a $6,000 investment. What about
a $100,000 investment? Just those six stocks compared to the overall stock market I would
have come out $120,000 more in the index fund.
The stocks they grew by 28%. The S&P 500 in
that time, grew by 40%. My stocks would have increased in value from a $100,000 to $128,000
while the overall stock market went from a $100,000 to a $140,000, $120,000 difference
between the two. Now, I want to share with you something different.
If you pick Amazon's stock in 1999 and held
on to it, a $10,000 investment would be worth a $140,000 today, $10,000 became a $140,000
if you had put $10,000 into the S&P 500 in the index fund it would be worth $15,000.
Let that sink in for a second. $140,000 In Amazon versus 15 in the S&P 500. The people
who picked it right or the people who we'll say guessed it right, if they had Amazon in
some type of mutual fund, their numbers are so skewed because of this one pick that you're
going to think they are freaking genius. Hey, if I had bought $10,000 in the Amazon in 1999
I would have a boat load of money.
I could have 20 other losers like the ones I just
mentioned, loser stocks that were flat or didn't grow and I could tell you, "Look at
me. I beat the S&P 500 by 50% or a 100%," or whatever it is over the past 15 years. I wouldn't be selling this idea of boring
index funds because I would be a genius. Unless you dug in which you wouldn't do.
You just
look at my annual rate of return and nothing more. You'd say, "He's got a 15% annual rate
return," maybe it's 11% or 12%, 13%, whatever it would be. You'd look at this 15 year track
record of being more than the stock market average, more that 10% and you would just
give me money with a smile on your face and a dream of beating the market all because
I happened to pick one winner way back in 1999 that did it really well and covered up
for all of the other bad decisions I made. Do you know what? We can't go back to 1999
and find that winner.
We can't. If you get in something today which is doing well because
something happened in 1999, you're not going to get those big gains. We dream of beating
the market. It's the same thing I did when I bought all
those stocks I knew nothing about.
It's the same thing you may have done when you buy
into a mutual fund today that you know nothing about. The people who tried to beat the market,
beat the 10%, they can show you those impressive returns. All they need to do is just have
one Amazon or one Facebook or maybe one Apple that they pick in the right time in that fund
to skew the results. If Amazon face plants like Apple has been doing lately, suddenly
it comes back to reality.
There's a study by a company called Dalbar, they found the
average mutual fund investor under-performed the stock market by nearly 5% over the past
20 years. In year 2014 alone, mutual fund investors under-performed the stock market
average by 8.19%. I don't mean if you take a $100 you would
have made $95 instead, 5%. We're talking 5% under the market average of 10%.
If you invested
a $100,000 in just in the stock market, the S&P 500, you made a $110,000. If you're the
average mutual fund investor trying to chase returns, trying to pick a winner, you only
made a $105,000, that's a $5,000 difference year after year after year after year that
money is not going to compound. What about the professionals? There's a new paper out
from two researchers at the University of Pennsylvania's Wharton School. Look at Jim
Cramer, host of Mad Money on CNBC I think it is.
He's a professional. He's a professional.
They looked ahead stock picks from August 1st 2001 through March 31st 2016 at his portfolio. It returned a cumulative 64.5% And that compares
to a 126% for the S&P 500 stock index. He's a former hedge fund manager.
He's a professional.
He under-performed by an average of 2.5% The overall stock market. I'll have a link to
that article in the show notes. Sadly, nation, you're listening to a big loser right now.
I got most of my picks wrong, Caterpillar, Home Depot. There are a couple of winners
that are doing better.
All others were big fails. In 2003, again, I got my pack-rat data
I was looking at, 2003 when I started getting edumacated. I started my first Roth IRA. I
looked out, I was like, "Wow, I did this way back then." What do you think I started with?
What do you think I started with? There it was in front of me, a Vanguard 500
index fund, $1,500 is what I contributed that year.
The academic research shows some people
get lucky and they get it right some of the time. Nobody gets it right consistently over
a long period of time. Even the Oracle of Omaha, Warren Buffett pick most of his winners
in the 1970's when he was in his 20's. Dude is 85 now.
His money has been compounding
for 65 years. That's one of the reasons he's a billionaire. He lives in a cheap house and
drives cheap cars. He's picked a bunch of losers too.
How do you make money investing
in stocks? By investing in low cost stock index funds which buy a wide array of stocks.
How do you keep from losing money by investing in stocks? By investing in low cost stock
index funds which buy a wide array of stocks. On to your questions. Kyle from Omaha, Nebraska asks if he can continue
to ignore calls from collectors. Says, "I've been getting calls from collectors for a while
now and I'm unsure of the best way to respond or if I should even bother to do so.
I've
never actually talked to these people. I only know who they are because I've Googled the
phone number. My issue is that I don't owe anybody anything and I pay all my bills. My
credit score is 800 plus.
I suspect this could possibly be an issue with my ex-wife but she's
supposed to pay her all debts per the divorce decree. I know she's had a history of not
paying her bills. In your opinion could I. Continue to ignore these collectors? I asked because if it's so serious I'd expect
something to come in the mail like a late notice or even a bill for that matter or at
least these people would leave a message stating what the bill is.
I don't want to buy myself
some trouble by taking a call from these collectors and accidentally saying something stupid or
incorrect. From what I hear, these guys are bunch of jack wagons."
That's my word. We had to clean it up because it's a family-friendly show. My first step
would be to get a free copy of your credit report.
You probably already done this because
you know your credit score but free copy of your credit report at annualcreditreport.Com.
Just make sure you don't have any debts or accounts that you don't know about. I'm not saying your ex-wife would have done
this but there are certainly some seedy individuals out there who open accounts in the name of
a family member or a former spouse and then they go on a shopping spree. You guys want
to put a credit freeze on your account just in case which everyone should have anyway.
Let's say your account is clean. You can't find anything you owe which is again probably
the case because you got an 800 credit score but let's check just in case.
Your next step
is to send the collection agency a drop dead letter. You have to answer the phone, ask
for the account number and get a mailing address for these guys. Don't engage in the conversation.
You just have to be repetitive if you have to to the point of being annoying. Get them on the phone, blah, blah, blah, you
say, "What is the account number, sir? What is the account number, sir? What is the account
number, sir? What is the account number, sir?" Once you get that you got to get on to who
you got to contact, "What is your mailing address?" You get the address or get the point.
Those two things thats all you need.
You need an account number that theyre referring
to and their mailing address so that you can contact them. You do have to watch what you
say as you mentioned. Both parties on the phone have to consent to a phone recording
if you live in California, Connecticut, Florida, Hawaii, Maryland, Massachusetts, Montana,
New Hampshire, Pennsylvania and Washington but here in Texas I can record a phone conversation
without the other persons permission. In the show notes and Im going to send
you a link to is a document I have on my website its how to send a drop dead letter to a
collection agency.
Its a quick letter, it walks you through the steps in order to
do that to get them to leave you alone and they have to leave you alone according to
the Fair Debt Collection Practices Act. You send them a drop dead letter, according to
the act they cant keep bothering you. Now, what may happen is they sell the debt later
on to someone else and then that someone else starts bothering you so then you have to go
to the process again. If you get sick of the calls, I get calls from Google all the time
they want to sell me advertising every week, its the AdWords stuff, just block the number.
If theyre calling on your cellphone just
block it, easy to do on a cellphone. If you have a home phone it might be a little bit
different how you can block numbers, it probably depends on your service and what youre
using there. If you get a home phone, why, in this day and age why would you have a home
phone? Not sure but anyway different subject. There are a lot of jack wagons out there,
its a pain.
Im sorry, you got to deal with this. You could ignore it if youre
100% sure the debts arent yours but I probably opt to send them a drop dead letter just to
stop the phones from ringing. Thanks Kyle, for the question. Im a huge fan of The
Housewives of Beverly Hills and by huge I.
Mean not really. Sometimes I would occasionally walk by the
TV in our home, it would magically turn on and just happen to jump to that channel and
I would end up watching it. New York show is okay. Atlanta, no.
Dallas theyve got
a new show, no, but on all of these shows each season they would be doing some type
of charity event, charity ball. Theyd all get dress up in their fanciest dresses and
fanciest jewelry, they would take the nice car out or get picked up by a driver and driven
to these events. Off the wall food, the waiters are walking around with their trays, everybody
is getting drinks, it looks amazing. Big charity events at these nice places like fancy hotels,
Id always be asking myself, Who is paying for all this stuff? And the answer is usually
its the charity through the donations.
I cant speak for the show or charities
on the show but you can start a nonprofit, throw a big party once a year and write off
the whole thing. I can start the [Brahm and Hollace 00:18:14] charity ball, collect 150
grand in donations, throw a $100,000 party, invite Taylor Swift, I dont know, come
to the show, play one song for ten minutes and pay her 50 grand or whatever and donate
whatever is left over if theres anything left over at all. There are many, many, many,
many great charities out there and then theres some not so great charities probably like
these ones on some of the shows where theyre throwing big parties for essentially themselves.
Before you donate to a charity you want to make sure the bulk of your money is going
to the people its supporting or to the thing that its supporting. Every charity theyve got different overhead,
different admin cost for what they have to pay to run the business because it is a business.
How do you know if your money is going to where youre hoping its going to, there's
three websites you can check, one is called give.Org, theres another call it charitywatch.Org
and the third is charitynavigator.Org and those links will be in the show notes.
In
the news periodically youll see stories done on charity scammers. Often a bunch of
scammers will pop up right after national disaster, say after hurricane Katrina, after
the hurricanes in Haiti. You think youre helping them but youre only helping the
scammers make easy money. Wounded warriors is another one thats been
in the news, some not necessarily good things going on there.
If youre going to donate
money to a charity heres a few things you need to keep in mind. Number one, dont
give cash, the legitimate charities out there they will accept a check from you or you can
donate online through a credit card or debit card if you want to do that. If someone calls
up on the phone dont give them anything over the phone, take down their information
and do some research on it. Send them your donation, dont give them access to your
checking account, dont give them access to your credit card number, dont give them
access to your debit card number.
Just because your friend on Facebook pops up a charity
doesnt mean its legit, people will share stuff on the internet, just share it without
any research or thought whatsoever so you dont know whats legit and whats not. Generally just take your time and do some
research if youre at a charity event or somebody who walks up to you and says, Hey,
or at work or whatever. Get the information. Get the information first, dont give into
that peer pressure to give money on the spot, say, I will check it out, and thats
the end of the story.
I was just at Costco yesterday and I was in the checkout counter
and the guy said, Would you like to donate Wooden Water, I dont even know what
it was so the answer is, No. Lets say a friend of ours is raising funds for
some charity that theyre participating in, maybe a bike ride or a walk run or we
got a friend who does Movember for when you grow mustaches. Normally the answer is going to be no, weve
got our set charities that were comfortable with that weve done the background research
on but just to everyday stuff and usually no, the answer is going to be no. Being generous
is helpful to others and its a good thing, dont be afraid to give, just do your background
checking first.
Make sure the charity is legit and the vast majority of them when youre
looking at those websites you want to make sure the 90% or more of the money is going
to the people or the cause that it is helping, not to pay the salaries of the administrators
or the employees or the rent or the parties or wherever the money is going to. Thats
just the general guideline that I use. Now, back to your questions. Sue in Chicago,
Illinois has insane in the membrane student loans.
I went nuts on school loans. I went
back to school at age 28 and mostly I worked in social service. The social service thing
wasnt working so I went for my masters, deferred the loans like crazy. Now Im 50
and trying to make amends in all areas of my life.
I have a good job but didnt save,
deferred and trying to conquer this mess. My major school loan is a combined and currently
$138,000. People told me I should get the ten year loan that whatever amount is not
paid at the end ten years is forgiven. The Public Service Loan Forgiveness Program
she's referring to.
Ive also heard this is only forgiven if you work for a not for
profit. My hospital is not for profit though Im not sure they will accept this as a
not for profit. Is this a good idea or should I go on with
my original option to run away with Costa Rica at retirement? Right now Im tied with
my credit card debt that is $41,000 and I. Have two peer to peer loans.
My credit rating
is 720. Ive owned my own condo since 2010, my mortgage is less than most rent in the
area, no car, decent job but robbing Paul for so long. It will take a while to get out
of my hole. Im trying my best though sometimes it feels it is too little too late.
What do
you recommend for the school loan? My monthly net income is around $4,000. The Public
Service Loan Forgiveness, the PSLF program is the acronym it goes under, will forgive
the remaining balance of your direct loans after youve made 120 qualifying monthly
payments under a qualifying repayment plan while you are working full time for a qualifying
employer. You got to qualify thats the most important
thing to check first and they have to be federal student loans if youve done some types
of refinancing with one of the newer lenders youll lose that option which is one of
the things you want to consider if you ever refinance your student loans. Use that forgiveness
option if you work in the nonprofit sector.
Qualifying employment for the PSLF Program
its not about the specific job that you do for your employer its just what your
employer is, who they are and where they fall into the program. To qualify government organizations,
federal straight local qualify for those its got to be a non-profit under the 501C3 IRS
code. After you meet those criteria you have to start to think about and do you plan on
working for your employer for the next ten years. This is the hard thing, it can be really,
really hard to think ten years ahead, Am I going to be here? I think its easier
for teachers, teachers normally go on to the profession and say, All right, I like teaching,
Ive been here for a while.
I kind of think this is going to be my career path. Nursing
at a hospital kind of similar but you arent stuck in your career path for those ten years.
If you bail out after 5 years and your plane gets completely derailed if youre planning
to go on for that ten year loan forgiveness or not. You could get inheritance halfway
through and maybe that will bail you out. Really math is going to help you to decide,
in the show notes Ill have you a link to the income based repayment calculator, the
IBR calculator from the Federal Government.
Its a loan forgiveness calculator, its
a little complex but you can work your way through it and itll help you figure out,
Hey, if I wait ten years Ill save this much money. If its negligible the amount
that youre going to save, in your case its probably not then you can decide, All
right, its going to take me ten years and six months if I dont follow this program
so Im just going to forget the forgiveness and try to knock it out as quickly as possible.
Here is an alternative I heard recently though and it made a lot of sense to me. Personal
finance its all about options in what you want to do, here are your options. Not do
this, not do that, its whats best for me and what that might be completely different
and thats whats best for you.
Pay your student loan minimums as if you are on a ten
year forgiveness plan, just the minimums. You take every bit extra that you would have
implied in order to pay it down quicker, say your goal is to pay it off in just call it
five years and make up a number. You take all your extra and you put that in a lock
box savings account and you dont touch it then in a year or two years or three years
youve got the lock box setting aside, youve still pay the minimums and you have options.
You can say, All right, I can stick with this for another eight, nine years or five
years, depending on how long you want to wait. Youve got this big savings account
on the side.
Are you going to pay more in student interest if you do that, if you bail
out on the ten year plan? Yeah, absolutely but you will have more options. Saying eight years you realize, Hey, Ive
got two more years to go on this ten year forgiveness plan, you got this big pile
of cash sitting over there and savings from all the extra payments that you didnt make
because youre waiting on the forgiveness. Im not saying hold on to it for eight years
but if you hold off for a little bit at least it gives you time to think about it. First
get the credit card debts knocked out, its partly number one because the interest rates
on those are probably higher than your student loans and those credit cards theyre not
going to be forgiven unless you declare bankruptcy.
While those are being paid off you start into
your ten year PSLF period, you get into that period and kind of get going and see how it
goes. Step number one, you got to figure out if you qualify, thats going to drive all
your other decisions. Thanks, Sue, for the question. I have an internal
saying that keeps me motivated, I dont want to be able to blow myself away, not to
impress anyone else, not my friends, family, strangers, just nobody.
Its me against
me and its you against you. Im not trying to be the best because there will always be
somebody better, somebody who's got more money, somebody whos got better hair, somebody
whos a better father, husband, business person. The one exception is nobodys got
a better cats but I have no control over how awesome my cats are anyway. Even if were a
professional athlete you can always sit at number one for so long.
I better be trying
to improve other areas of my life so I can always be challenged. You cant beat me,
you cant, but I cant beat you either. Maybe sometimes occasionally at some things
but not every time. When you focus on winning the battle within, you take the pressure of
yourself of trying to meet somebody elses ideals and somebody elses achievements.
You dont have to compare yourself to anybody else.
You also find when you focus on your
game and your life and your money and your relationships. They will improve ten times
more than if youre constantly comparing yourself to others which often just leads
to discouragement. Use others as a guidepost to learn from rather than as a measuring stick
of your own accomplishments. Those are the words.
Thats it for this episode Losing
My Speaking Ability. Im your host Scott Alan Turner Rockstar. Katie is my producer.
All the links mentioned in the show are available in the show notes on ScottAlanTurner.Com.
Other question they'll get answered on the show visit goaskscott.Com and leave me a voicemail.
Thanks for listening. Okay nation.
Feel free copy of the guide How
to Save $1,000 in One Week, simply subscribe to the Podcast right now on iTunes and text
the word SAVING to the number 33444 to prove that you did it. Subscribe now to get out
of debt, save more money and retire early. See you next time..
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