After a powerful run in the markets, many investors are asking whether the stock market is too hot and what that means for their portfolio. In this episode of the Wise Money Show, we break down recent market performance, valuations, volatility, and the key forces driving stocks today, including AI, interest rates, and global diversification. You’ll learn how to think about risk, rebalancing, and staying disciplined when markets are near record highs to have confidence for the year ahead.
Season 11, Episode 23
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Transcript: Is the Stock Market Too Hot Right Now? What Investors Should Do Next
It’s time for wise money with Korhorn Financial Group with certified financial planners Kevin Korhorn, Mike Bernard, and Josh Gregory. [Music]
Segment 1: Welcome to another episode of the Wise Money Show with Korhorn Financial Group, where every week we’re helping you take your next wise step in your financial life. Thanks for being here, friends. My name is Mike Bernard. I am your host. I’m also one of the certified financial planners on the program. And with me in the KFG studios, my business partners and fellow CFPs, Kevin Korhorn and Josh Gregory. After another surprising year in the markets, many investors are wondering, has the market gotten too hot? And how much upside is left before we see a pullback. We’re reviewing last year’s performance of the market, as well as helping you know how to be positioned for confidence this upcoming year. That and more in this hour of the Wise Money Show. That’s right. Focused on the the market. It’s been obviously we had a little turbulence this week, but man, it’s been an incredible ride and leading a lot of people to say, is the market too hot? What should I be doing? We’re helping with that right now. You can call or text us if you have a question for the for the show or have any needs. Call or text us 574222000. That’s 5742222000 online. Wisemoneyshow.com is where you can find us, engage with us that way. Reach out to us that way. And then all over social media as well. Wherever you’re at, we are there as well. Search the Wise Money Show. Guys, just going to jump in the deep end. Is the market too hot right now? What What are your thoughts? I I think that’s the right question. I think it is the question on most investors minds and on their lips even. I feel like I’m in this conversation all the time with people who are asking, “Hey, how long can this party keep going before we have our next interruption?” And uh it’s not that anyone’s complaining because who doesn’t love to open up their uh investment statements each quarter or each month and see a new high and see the the continued strong performance? But man, by historical standards, we’re always measuring, well, how expensive is the stock market? Not not what’s the price level of the stock market, but what are you getting for that investment? What kind of profits are you going to be able to control when you own a basket of really great stocks? And uh by historical standards, it’s not that it’s never been this high. It has been. It’s been expensive. Um but it’s it’s on the pricier side, right? Okay. You’re saying it very nice. These are about the second most expensive levels from a price to earnings ratio we’ve ever been. Now that does not mean that oh and watch out things are you know it’s inevitably going to going to fall but uh we have had an unprecedented run in the markets right last year 2025 large cap stocks you know above average return 2024 above average return 2023 above average return 2022 was negative but 2021 above average return 2020 above average return 2019 above average so when you look at the run over the past six is well above average. And now that doesn’t mean what goes up must come down, but I I Yeah, I my my expectations are a little tempered for this year. Yeah. I I So Josh liked your question. He said that’s the right question. I don’t think that’s the right question. I think the right question is what is my relationship to stocks and what should I own? If I have more money than I need to live, where should that money go and what should it own? Should it own assets or should it own debt? It can be more complicated than that, but I think you could boil it down to those two things. And if it should be to own assets, the simplest and easiest and most efficient assets to own are is the stock market. And when I go back and look at my career o over time, when I started July 19th of 1994, the Dow Jones Industrial Average was at 3,700. It’s now at 49,454 or whatever it is. And so you look at this and you say this incredible growth. I most of us can’t comprehend that kind of growth. And if you said, “Hey, I want to participate in the American dream, at least as the game is played right now, you have to own assets.” And so the question is, “What assets should I own? How do I own them?” Um, I know people that bought lake property back in the early ‘7s, and they said, “That’s way too much to pay for lake property.” Guess what? Lake property has always seemed expensive, and they’ve made a gazillion dollars. So when you when you look at that really the I think the big idea is to figure out okay what should my relationship be to the stock market. Do I participate? At what level do I participate? Because if the if you think it’s too hot and you think you’re going to need some money and you’ve got some money that that’s that is invested in stocks, it’s a great time to uh take some of that money and do some stuff. Yeah. Yeah, man. And I was having this exact conversation with my oldest son, Jaden. He he turned 18 this past week and we were at lunch together and he he’s getting started in his own investment um uh journey and everything and I was teaching him about the S&P 500 and sometimes it can be expensive and then it has a pullback, but over the long haul you can you can expect that worldclass companies are going to be more valuable in the future than they are today. And we did that exact exercise that you just walked through, Kevin, looking back at at the day he was born. What was the S&P 500 at and what is it today? And and we started counting the doubles that have occurred just during his lifetime. And I I got to tell you, that is a fantastic mental exercise to go through if you’re needing some encouragement on well, is now a good time to invest or isn’t it? Is the stock market expensive or isn’t it? In the short term, it can be expensive or bargain and it bounces around in between, but over the long haul, what is it going to do? It I I love the analogy or or the comparison to lake property. What is this thing going to be worth in 30 years or 40 years? Yeah, that’s what Jaden uh needs to know, right? And uh whatever your time horizon is, I I would be giving this a long-term uh outlook. And uh yeah, owning stocks, owning world-class companies has historically been a very reliable way for you to compound wealth for your future. And so you’ve touched on both of you have touched on the the relationship between time horizon and risk tolerance because all of those things that you’ve mentioned like the the attributes of the market. Well, but there’s risk as well, right? We do know that, you know, 2022 was a very difficult year in the markets. Even the spring of last year during all the tariff tantrums, that was a difficult time in the market. Uh certainly COVID was a difficult time. We’ve had lots of spells where oh gosh, it shakes your confidence as an investor. And so that’s where well, you you only want to take that risk to have those potential benefits if those are long-term dollars. If they’re short-term, they really shouldn’t be in markets that or investments assets that are that volatile. That’s right. When I look at the themes of what’s been driving the markets, uh, and really even just looking at last year, I I think international stocks breakout year in 2025. I want to get your guys’ opinion on that. Uh, the MAG seven, Magnificent 7 and AI trade, want to talk about that as well. And then certainly Fed policy, monetary policy, and the markets. But before we get into each of those themes, let’s just quickly recap. You know, what did the market do last year? What were some of the high points? Were Were there any low points, right, in the markets? What do you guys uh what what’s your take? Well, the S&P 500 really uh was a delightful uh I’m I’m going to you know, it’s funny because it’s it’s like, well, it’s a surprise. Is it a surprise or not? But all in the S&P 500 was up 17.9%. One of the things that’s most exciting to me is because we serve so many retirement plan participants, we can see at a at a top level what the plan itself performed which is the amalgamation of all the participants and these participants are participating in the American dream and they are making money in their retirement plans. It is exciting. Yeah. Diversified portfolio last year somewhere around 15% something like that. Small caps were only up 12. And I say only, that’s above average, right? Long-term, the market’s up around 10. It’s between eight and 10, depending on the time period you’re looking. So, small caps only up 12. Uh, high yield bonds up 12. Bonds in general up seven. So, and and international and emerging markets up over 30% each of them. And these are total return numbers that you’re you’re quoting, right? So, it’s uh the the valuation has increased or the price has increased and there were dividends earned on on many of these investments or interest on bonds, that sort of thing. Honestly, like if you if you get if you look underneath the hood, you know, Bitcoin or cryptos, they didn’t have a fantastic year last year. Uh but it really was the the the year of of a gold breakout, silver breakout was unbelievable. and yet a diversified portfolio well above average. And and that’s where again I I just part of me, you know, not that I’m um glasses half empty at all times. Uh not satisfied when the market’s going up and certainly, you know, fearful when the market’s going down, but let’s just call it what it is. 2025 was an extraordinary year as an investor to be diversified. It was almost as if no matter what you invested in, you were going to have a good year as long as you just stayed through it and and stayed with it. And so I do think maybe it’s not the right question, but I think it’s inevitable to say, well, wait a second. I know markets don’t just go up. Uh should we brace ourselves for a downturn? We’re going to weave through the big uh you know the big themes of of what’s driving the markets right now, but all leading towards what should you be doing in your portfolio. We’ve got that and much more coming up here on the Wise Money Show with Korhorn Financial Group.
Break 1: Hello YouTube. Thanks for being here. This is the Wise Money Show. What you’re watching right now is our weekly 1-hour talk show that airs right here on this channel. 10 a.m. Eastern time every Saturday morning and also on podcast at the same time as well, but also on a couple local radio stations at the same time, which is why the content’s broken up the way that it is. Originally a radio show. We video recording it, but this is a we’ve got segments and commercial breaks, all that sort of stuff, but it’s it’s a talk show. It’s long form. If you’re looking for something more direct, more concentrated, shorter, briefer, less banter, we’ve got that for you as well. Next step videos are all throughout the work week. We’ve got shorts as well. So, make sure you hit that subscribe button, turn on notifications so you’re made aware every time we drop new content. If you like the content, like the content, leave comments and questions as well. We’ll answer them and get back to you. We appreciate it. Thank you. All right, we’ll pick back up with international. I don’t know if anyone’s got I again, and I don’t need to be necessarily precise with this. We can say approximately but the latest I heard was approximately half of international’s performance was due to dollar weakening. And so when you look at that that’s like in real terms in a in a way large cap and international were equal but listen it we’re in the US we’re talking about dollars here international more than doubled. I think the only thing that we left on the table there and you you touched on it, but some I think it should this point I mean one of my favorite sides and guides to the market is the annual returns and intrayear declines because you said you know the market was down a little bit last spring with the tariff tantrum stuff and I’m I mean the S&P 500 got to be down 19%. Oh. Oh, I know. And before before the show when you’re like you know the tariff thing people were concerned that’s really oh no that was a real that was I know but I know enormous issue. I know but in in in the in hindsight it feels like oh it was just an afternoon and if you were taking a nap you would have missed it. I know but that that’s the amnesia I’m talking about. That is bologoney. And that’s why I’m saying, okay, put, you know, just wear your helmet because we could we could be down 20 25 34%. Um, let let’s pick that back up and then we’ll get into international. Okay, so all right, here we go.
Segment 2: Feels like as investors, we haven’t really felt a ton of volatility. Yeah, we had a little bit of turbulence this week, but it’s been about a year since we’ve had any volatility. And one of my sayings, it applies to me, applies to all of us as investors. We have amnesia. It’s just we forget what happened in the past and and it’s important that you brace yourself for the the full spectrum of returns of the market and and it should drive your investment decisions. We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard. With me in the KFG studios, Kevin Korhorn and Josh Gregory. Stay up to date on all wise money content. Find us online, wismoney show.com, and then all over social media. Wherever you’re at, we are there as well. search the wise money show want to get into the theme of really I mean for the first time in a while international markets clobbered the US clobbered and and to you know to ease that pain well this S&P outperformed you know long-term average so it’s fine but listen yeah international do you need to allocate more to it but before we get in there Kevin you know we were talking a little bit in the first segment about volatility and what you should expect it does feel like as investors I I feel this. There’s a little bit of a complacency. Oh, the markets are just kind of going up and it’s been pretty smooth. We’re fine. Just 10 months ago, we had one of the most significant and extreme bouts of volatility and you know it it’s hard to even remember. Yeah. Last April and and the market got down the S&P 500 which we’re talking about got down to – 19%. And if you don’t if you weren’t paying attention, you could you could have missed it. Now, some people were paying attention because there were people that sold equities down 19%. Some people got out. Yeah. Down 19%. And they were looking and they were saying, “Hey, I’m able to predict what the impact of these tariffs are going to be.” And this is the this is the tricky thing. It’s to me predicting the stock market. It’s almost like predicting the lottery. I think you could have as much fun just writing down six numbers on a pad of paper and then looking at the numbers tomorrow morning as you could going over to the gas station and giving them a $20 bill and and getting numbers because it just and and I’ve done those types of exercises to prove to myself predictive ability is terrible. But but in hindsight you feel like a genius. You look back and like well of course well that wasn’t even an issue. No, no, no. That 19% decline was in a couple of weeks. Mhm. We 2022 the stock market finished down 19%. It took 12 months to get there. It was down 26 or 25% over 10 months. No, we were down 19% in a couple of weeks. It was one of the most extreme drops and then we had the fastest rebound ever. And yeah, you just don’t realize that, Kevin. I mean, one of our favorite charts in uh and in and a slide deck that that we update and review is has to do with that interyear volatility, right? So, what what should investors expect just in any given year? I would expect in any given year you may see an a down 20%. just just plan on that because when that happens because what all of this is about and we talked in the first segment about what is my relationship to equities how much should I how much exposure should I have to equities but also it’s not as much about investment performance as it is about investor behavior and what are you going to do when that happens because as soon as the market is down 20% year to date I You could have listened last April. All the smart people come out of the woodwork and say, “See, I told you so. Uh, equities are terrible. You should buy gold. You should do this. You should do this. You should do this.” And it makes people um the fear fear makes people easier to uh maneuver or control. And I would say stay out of the fear trap. Yeah. Yeah. And for some people, the the antidote is just making sure that they’re not watching their investments too closely. You know, the people who missed that major decline in the spring, their life was just fine. And in the end, it turned out to be a fantastic year as long as you didn’t have a knee-jerk reaction and sell when the market was down uh in that dip and the your management of your emotions when we are encountering a dip. And I love that you’re you’re going there, Mike. I I have that chart up in front of me. It’s 14.2% on average. So on average, every year we’ll have a 14.2% dip. Often it is much more than that. Sometimes it is much more calm than that. Um so your your advice Kevin to be expecting a 20% decline is wise. it it’s what you want to want to be expecting and that way when it occurs you’re not going to have the wrong reaction because most of the years when we have that dip the market still ends positive right so don’t jump out midstream instead let this thing play out again these are long-term investments let them behave long term oh gosh and I I want to get into the international market stuff we’re going to get there next but just one last thing on this I think because of how fast the market has run up. You probably have a larger portfolio right now than you’ve ever had in your life. And so, let’s just recognize even though you might hear Josh and Kevin and say a 14% decline or expect a 20% decline, and you might say, “Yeah, okay. Yep. I I get that.” Do the math on on a bigger portfolio. Those percentages are going to be bigger numbers and they might they might just conjure up a different response. And you want to be prepared for those emotions so that you make sure that you don’t overcorrect. All right. Now, let’s speaking of emotions, I think in the US it’s common, they call it a uh a a home country bias or or whatever, but I think it’s common in the US to to have more dollars invested in the US stock market than international. Yeah. The global market right now is about 70% US, 30% not US. Josh, I remember in our career when that was 50/50 and it’s not anymore, right? But US stocks, specifically large cap, have absolutely destroyed international over the past 15 years that instead of saying, well, you should still own international, a lot of people have said, I’m never owning international. And if that’s been true for you, then you you missed out last year. I mean, the international markets were both up. international and emerging both up over 30%. That’s that’s a that’s a big deal. So guys, thoughts on international? Should people is it just make sure that you’re diversified? Should you add more to international? What are your thoughts there? Man, I I told you guys that uh it’s really both of my sons are really getting more interested in investments and I’ve helped them uh start making some purchases along the way here. And I was having this debate actually with uh my son Justin because he he has watched the S&P 500 for a while. He’s been kind of dabbling in it for a couple years now. And I suggested to him, you know, this may be a time to be considering instead of buying an exchange traded fund that tracks the S&P 500, maybe we need to be looking at a more global fund. And he did a little bit of, you know, just investigating and he said, “But dad, that one doesn’t look like it’s done as well. like the S&P 500’s just been more consistent and that’s what I know and he he didn’t know it but he was articulating exactly the objection that so many investors have had the US is killing it why would I hold anything else right and the the point is international and US investments if they were going toe-to-toe uh over time one is going to be uh trending better than the other in any given year or any given stretch and the US has just had an amazing amazing run u of outperforming and it is possible yes that they can both do well in the same year but you know there are enough um tailwinds right now for some international investments they’re performing well and then you also get a boost in the rate of return when the US dollar weakens and that may sound like a bunch of gibberish to you but just know that geopolitical um you know winds changing interest rates it’s changing abroad versus the US. Like all these things have an impact on how strong or how weak the dollar is. And when the dollar is weakening, your international investments get an extra boost because when you convert those international returns back into dollars, you’re getting to convert into more dollars. And so here at home, your international investments just feel like they’re performing even better. Yeah. I I would I I like just staying disciplined, being diversified. And if you look at that global allocation of 7030 and you say, “Yeah, but the opportunity and international stocks hasn’t been great. I think the the um the opportunity set ahead for for AI and some of the large American players may be better here in the US.” Then overweight, I’m fine with that. Overweight more than 7030, but I would I would stay grounded. Don’t abandon though, right? Yeah. Stay stay disciplined. Yeah. And it’s not just developed but because when you when you look at it the big some of the biggest companies in the world in various industries are international companies. So would you participate global in nature and I like emerging markets. So I I yeah I it’s hard to think of these large companies and not as global companies. They all are. So in a way you are investing globally and I I would anyway I would stay disciplined. We’ll see uh how international whether the tides change. You know, they they do go in cycles. So, what are the other items driving the market? AI. Gosh, we’ve got that and more coming up on the Wise Money Show with Korhorn Financial Group.
Break 2: Yeah, Kevin. Sorry, I didn’t mean to. No, no, no, no. Thank you for I I wasn’t sure if you that one went by fast. I had no awareness of the clock. All right, we’ve got to get both the AI and concentration. I know that’s a that’s a big one. We’ve got to hit that and Fed policy in this even if we I mean the Fed policy stuff can be really brief. So we’ve got to wrap that up so in the fourth segment we can be talking. All right. What do you do? So this is the third, right? This is third. Yep. Yep. All right. So AI mag 7 market concentration. Here we go.
Segment 3: The US stock market has never been more topheavy, more concentrated than it is right now. Is that a opportunity or is that a big risk that you need to watch out for? We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard with me in the KFG studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show is on podcast. Wherever you listen to podcast, just search the Wise Money Show, subscribe to it there or rate the program there. Follow us there as well. We appreciate all that guys. Talking about uh the investment planning, this that’s one of the six areas of your financial life. There’s six areas and and gosh, most financial professionals only focus on investments or maybe investments in retirement. Guys, that’s just a a couple pieces of the entire pie that you’ve got to factor in and consider when making wise financial decisions. And yet, at this time of year, you know, we’ve said goodbye to 2025, we’re looking ahead to 2026, and what’s the market going to do? Is it too hot? And uh and and and how should you position your portfolio? Part of that that too hot is are we in an AI bubble? When you look back, we’ve mentioned it that the the history uh a little bit. 2022 was really rough year in the market, just grinding lower. It was hard to be optimistic at all. A lot of people said, “I’m going to stop investing until this gets better.” And yeah, probably not. I mean, in hindsight, you’d say that is not the right approach. But is it coincidence or not that the stock market bottomed in 2022 uh in the fall, October, November, and the release of Chat GPT was the exact same time? I I I actually do wonder whether that’s coincidence or not. Um but we have had an enormous rally since then. AI, whether you say we’re in an AI bubble or not, there’s no denying the impact it’s already had on the markets and the impact it will have on these large enterprises and large businesses. Uh it has led to though some I don’t know overweight in the markets, some concentration. We are now at I mean of the S&P 500. So you hear that and you think okay that’s logically 500 of the largest companies. Yep. But the index isn’t just one 500th to each. It’s based on well, how big is the company? So, so it’s a weighted average. It’s weighted. So, Nvidia as the largest is going to carry more weight with it. Well, guys, the top 10 companies. It’s never been more topheavy than it in is right now. And I It’s not like, well, it’s been close before. No, we are at uncharted levels. Yeah. And have been for a while and keep going higher and higher. Yeah. top 10 companies now make up 100% more than they’ve ever made up. Yeah. And so I mean it’s interesting to go back and look because it it kind of bounces between 17 to 20%. Is what um history would show and now we’re just shy of 40%. It’s incredible. So in other words, the top 10 out of 500 companies, the value of those 10 is 40% of the S&P 500 now. Yes, it is. It is impacting 40% um of of the returns that you’re experiencing. That is breathtaking. And 490 companies make up 60%. Yeah. I mean that it is I when you look at that you say yes. And as you know when we talk about how things work, if uh retirement plans across the country are putting money into an S&P 500 index, those companies are their share price is grinding higher just because there’s more money going into those stocks every day. Yeah. When when you look at the MAG 7 then obviously the MAG 7 is part of that top 10 that we’ve been talking about and you look at how the MAG 7 each performed in 2025 compared to the S&P 500. Yeah, there were a couple that way outperformed, but several that underperformed and it was much tighter around the S&P 500 return than what we saw in 24 and in 23. The MAG 7 in each of those two years just crushed it. All of them compared to the S&P 500. So much tighter and yet still the MAG 7 still drove a significant amount of the entire stock markets index. So guys, do you see this as a risk or do you see it as an opportunity? I hear a lot of people when they come in, they’re like, “Hey, are we do we own AI stocks? Are we are we, you know, part of this?” Yeah, actually more than ever before just simply because of the weight it has it carries in the in the overall market. Is this an opportunity or a threat? Well, it’s both. um which sounds like a little bit of a weasel answer, but they what people want to do as soon as they this is their attention is drawn to this. They’re tempted to say, “Well, then just take all my money and put it in those.” If if those stocks are doing that well, let me just put everything in those stocks. And that is almost certainly the time that they turn around. Well, it’s funny. I actually saw a report and Kevin, you can probably speak to this going back to the internet days. you know, Josh and I entered the career, right, as the bubble was popping and bursting and all that, but but yeah, they did a I I saw a report of Nvidia and I think um a few of them that if the share price over the past five years, if it continues that way over the next five or the next 10, like the size of these of what these companies would be compared to the entire world and it’s like I just don’t see how that can happen. And you might say the ride that we’ve been on, oh back then before it happened, you would have said that couldn’t happen, but like it’s just astronomical and and it’d be hard to imagine that they’ll continue to grow at the same pace. Yeah. I I think the comparison I I’ve made this comparison many times the AI race versus the internet bubble that existed you know when we were in college high school it was all kind of the rage and it as you said it was a bubble that burst early in our careers but uh it wasn’t that the world was wrong when they were saying that uh internet companies or the internet uh age was going to transform the economy transform the world they they were absolutely absolutely correct. It just took longer than what anybody was really saying. And so the prices in the late 90s just got up to levels where there was no room for any kind of error or or any kind of shakeup of any kind. And I I think that AI absolutely has the power to transform our lives in the future. The question is, well, how long will it take? And do these prices make sense at at these levels? or I is there maybe room for them to kind of pull back a little bit and still be appropriate um as a long-term investment theme? This is because of this concentration like going back to the item we talked about first which is international stocks. This is why diversification is more important right now. I personally don’t love equal weighted indexes. I I think the S&P 500 and that it is a um cap weighted index, sorry for the geeky terminology there, but I think it makes a it a very uh active passive investment. And what I mean by that is because the investments that are growing in size because they’re stocks have grown faster are getting a bigger and bigger share of your investment. I think there over the long term I feel like that’s a good thing. And uh and yet it exposes that you’re less diversified than you once were. Make sure you stay you stay diversified. All right guys, last real theme and this kind of weaves into 2026 as well. Obviously Fed policy, monetary policy impacts the market. You know, we had a few I would say reluctant interest rate reductions last year and they’re sort of trying to temper expectations for rate declines in the year ahead. Thoughts on Fed policy and has it really driven the economy much? hasn’t driven the markets much. What do you expect in 2026? What are your thoughts there? Well, I think we’re going to see some changes because Fed Chairman Powell is done in May. And there are two schools of thought right now. One school of thought says that interest rates are exactly where they should be and based on evidence and everything else. And and then there’s another school of thought that says no, they’re too high and they should be reduced. I actually think the the feeling that they’re right where they’re supposed to be wouldn’t be based on evidence, more based on fear and risk. We don’t want inflation to to really roar back and therefore we’ve got to keep interest rates high. I think the evidence is sort of showing that um even though inflation still feels very high to the average consumer because prices just continue to to to stay elevated or creep higher, uh the data, the year-over-year change suggests interest rates should actually be much lower. And I don’t think that’s I I wonder how much of this is the Fed watching um on the horizon. There’s going to be some sort of an economic lift that comes from all of the tax savings that were really enacted in the middle of 2025 with the one big beautiful bill act. Mhm. But a lot of the um the effects or the feeling for consumers is going to come when they’re filing their taxes and they realize, “Oh, I got a pretty significant tax cut and didn’t even know it.” Um and may have a bigger refund coming to them than they even realize. That has an impact on spending that can drive the economy. Does it give the Fed a little bit of room to just wait and see what happens uh with inflation and therefore interest rates? Yeah, very very possible. I I think the posturing right now is that there’s a um a a a one or maybe two interest rate reductions this next year. But we’ll see. We’ll see how much that drives the economy and the markets ahead. All of this though, what should you do about it? But we’ve got that more coming up on the Wise Money Show with Korhorn Financial Group.
Break 3: All right. Okay. So, are we done with that? Because I mean, yeah, it really the fear is inflation, but the benefit of lower interest rates is the federal government pays less for debt service, right? the greatest beneficiary of lower interest rates, right? And in theory, um, that should have a cascading effect with consumer borrowing. Mhm. So, okay. So, we’re going into the fourth segment, landing the plane, as Michael Paul Roth Bernard would say. And uh as we do this, what do we need to make sure if we’re batting cleanup that we get done in this segment here? Uh I think we’re trying to then weave towards well what do you do as an investor and um so you know you know the rebalancing that that sort of stuff. Uh so yeah, as well as make sure your short-term money is in short-term type instruments, all that sort of stuff. Okay, one second. Yeah, so we want some sort of maturity match because I I do you ever think about how much money Warren Buffett has in cash and so what is it 150 billion or something like that? Oh, I if you had asked me for a number, I thought it was like 300 something, but Okay. Well, like I I thought it was the highest ever. Yeah. Well, it So, okay. So, it’s No, there’s a changing of the guard happening. So, that could drive some But who But who is saying, “Hey, that 300 billion that got three and a half or 4% last year could have gotten 17 if it was just in the market.” You think anyone’s saying that to Warren Buffett? Are you looking the number up? cuz I could totally be wrong. You said your number a whole lot more confidently than I was feeling. Well, it that’s just a function of having old information and confidence. Um, yep. So, I was I was confident and I was confidently wrong because it’s about 381 billion with a B in cash cash equivalent short-term instruments. So, you know, if you if you think about that as an investor and you say, “Hey, what am I doing?” If I have that money sitting on the sidelines and I’m waiting for an opportunity like Warren Buffett is, um, I might not get the same opportunities that he does, and I might be held to the same standards that he is. Uh, do I need that much? And is there a maturity match with what I’m holding? Yeah. All right, let’s get into it. Let’s do it. Here we go.
Segment 4: Thanks for being here. This is the Wise Money Show with Korhorn Financial Group. My name is Mike Bernard here with me in the KFG studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show, as well as a lot of other content, is on the Wise Money YouTube channel. Go check it out. Go check it out. Go to YouTube, search the Wise Money Show. Subscribe to it there. Turn on notifications so you’re made aware every time we drop new content. This talk show is there as well as a lot of other videos that we post all throughout the work week. All designed to help you take your next wise step in your financial life from a comprehensive financial planning perspective. Go to YouTube, search the wise money sub wise money show. Subscribe to it there. Okay, guys. We’ve been focusing on what’s been driving the markets and the unusual just fantastic performance that we’ve seen last year and the past several and uh and so all of it leading to okay, what should investors be doing right now? What are what are some habits maybe long-term tried and true habits? What are some unique to right now? What do you guys think? I you know honestly I I might reframe that and say not what has to happen right now because that almost makes it seem like oh there’s an opportunistic play here or there’s a really great response to what’s happening in the market. I would point people back to their financial plan. You know whatever investing you’re doing right now it has a purpose attached to it. You have a goal in mind and a time frame for that goal and hopefully a plan for how you’re going to achieve it. How much are you adding to those accounts? And how are you structuring those investments? And in the short term, man, it can be very tempting to get off your long-term game plan and try to capture some awesome opportunity or ride an awesome wave because everybody’s talking about AI or what’s the Fed going to do next? All of that. And unfortunately, most of that is probably noise for you. If you have a long-term goal, you need to almost plug your ears and ignore much of that and instead revisit the long-term mix of investments that is appropriate for your goal because that mix of investments may have drifted out of alignment just simply because you’ve got some investments that have been killing it, have been uh climbing like crazy and they have ballooned to a larger share of your overall mix than what you may have intended. And so rebalancing is one of the most important things that you can do. It is um it’s it’s not sexy. You know, this is just uh we often say blocking and tackling, right? This is just the the fundamentals of being a great investor and it’s not something that’s ever going to result in bragging rights at the next backyard barbecue, right? Yeah. I so rebalancing but I but to your first point Josh rebalancing back to where your risk tolerant should be based on your plan. If if we started let’s say 2022 stock market was lower uh you’re get you got another year closer to retirement but you didn’t want to reduce your risk then because oh stocks were down 20%. So then 2023 things rebounded you’re now another year close to retirement. Let’s see if it continues to rebound. 2024 the stock market ripped the cover off the ball. You said, “I’m not adjusting things now, but now you’re a year closer to retirement.” 2025, same thing. Well, here you are over this time. You’re getting closer and closer to a time period where some of those dollars, not all of them, that’s a big mistake people make, but some of these dollars are going to be needed in the short term. And therefore, I yeah, making sure that you tune into your plan and what’s the right risk level for your plan and your goals. And then is that the right risk tolerance for your emotions and temperament? And then is that the risk tolerance you’re taking in your investments? And I’ll give you an example that’s close to home for for us. One of the goals that we’ve been investing uh for over nearly two decades now is college. And we’re about to send kids off to school here in the next two or three years. It we no longer have 10 years to let investments bounce around and do their thing. It’s getting close to the time where we’re going to be drawing on these assets and paying some big bills. And uh because of that, our our mix of investments needs to change. It needs to get a whole lot more stable, more of it in cash and readily available instead of continuing to try to climb um the the next rate of return that we hope for the years to come. Yeah, I would I I would make sure that you’re properly diversified. Right. they were talking about you rebalancing and all that sort of stuff but going back to having the uh you know the the you know how much should you have in international investments those sorts of things but I would also say it’s important to be diversified in midcap and small caps and um and so making sure that you’re properly diversified Kevin at the out at the you know start of the show you talked about whether we should be you know what relationship do you have with risk and with stocks and How much should you have in bonds? Right? Are you going to own assets? Are you going to own debt? Bonds are a are a form of debt. It’s investing in debt. Your return is a bit limited. The profile is very different. And so ensuring that you’ve got the right allocation and the right level of diversification. Yeah. And the the interesting thing is there if you’re working with a financial professional um and people say I’m working with a financial adviser. For some folks, that means I’m working with just with I’m working with someone who sells investments and they know about my investment portfolio, but they don’t they’ve never talked to my tax planner, tax prepareer, other things. There are six areas of your financial life. So, investment planning is not the only area of your financial life. I would not ignore the other areas um and just focus on this. But if you’re focusing on this, one of the things that you should know is there are things like a 351 ETF exchange fund there that are strategies if you’ve got a concentrated position and you need diversification. There are there are other investments where you can give up some a little bit of the potential upside to protect the downside and and to hedge against these things. So if you’re getting to a point where you say, “Hey, I’m nervous and I’m thinking about my money more than I want to be thinking about it.” There are there are better strategies than ever before and technology is making these accessible to main street. So you can you can do things with your money that you were never able to do before. So I would encourage you, hey, lean in, learn about things if you’re not uh if you don’t have financial peace. If you do, stay the course. That’s what we tell you. Let your long-term money behave like long-term money. Last year, it would have been down 19% before it finished up 17%. If and and let your short-term money be short-term money, and don’t don’t uh have any regrets about that. Yeah, you know, I said earlier in the show that uh this past week uh one of my kids took their first step into being an investor and um getting some experience on their own and um you know the the reason why I encourage them to get going, not not only because they’re adults now or they’re they’re close to being adults and they ought to be in the rhythm or the pattern of saving and investing, but mostly it was about let’s start getting some investments that you can begin paying attention to and learning with. This is more about the learning in their case. And I wonder if you’re listening today, is there a goal? It’s still early in the year. It’s not too late to be setting some goals for yourself, some objectives. Is there some learning that you need to do this year? some uh becoming more familiar or comfortable with your investments so that you are less likely to have emotional responses when they are bouncing around in value on you. The next time there’s a dip or an interruption to the long-term climb of your investments, what does it do to you emotionally? To me, knowledge and understanding and experience perspective that helps you to avoid the emotional response which which often is a mistake. Yeah. I and maybe avoid might not be the right word, but helps you like counterbalance some of those emotions that I think are inevitably going to come as we see some turbulence. I would also make sure that you’ve got your dividend reinvesting. I know the dividend yield is much lower in the markets today than it used to be, but reinvesting that that compounds. And then I’d make sure that your investment strategy, yes, is connected to your entire financial plan, but certainly your tax planning as well. Roth conversions, cap uh you know, cap gain harvesting, all that sort of stuff. Make sure you’re funding the right accounts and it’s connected. Guys, Wall Street firms, we don’t like to forecast. They do. It makes for good headlines. Wall Street firms on average are expecting another above average year. 11% on average uh like expectation for this year. Anyone willing to stick their neck out there and say, “Hey, here’s what I think the market’s going to do.” No. Um, mostly because any confidence I had just went out the window when you said that most Wall Street uh firms are saying One Direction cuz they get it wrong just as often as everybody else. I I don’t Yeah, I if it wouldn’t surprise me if the market was up 15% this year. Yep. And it wouldn’t surprise me if the market was down 15%. I think AI trade there’s a there’s a lot of of you know tailwinds driving the markets that could push the markets higher, the economy uh in an even better spot. I just looking at averages, long-term averages. If in the short term we’ve been well above average, I just my expectations are a little tempered for this year, but that doesn’t need to move you off course with your investments. Make sure you’re connected to your financial plan. Work with your certified financial planner on that. That’s all the time we have for today. On behalf of Josh Gregory, Kevin Korhorn, all of us at KFG. Have a great weekend. We’ll see you next Saturday for the Wise Money Show with Korhorn Financial Group. Securities offered through Silver Oak Securities member FINRA/SIPC. Advisory services offered through KFG Wealth Management LLC. Join business as Korhorn Financial Group. KFG Wealth Management LLC and Silver Oak Securities Incorporated companies are unaffiliated.
