The Personal Finance Podcast - Should I Invest in REITS? (Money Q&A)

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Starting point is 00:00:56 Find your advisor at IG Private Wealth.com. On this episode of the personal finance podcast, should I invest in REITs on this money Q&A. Welcome to the personal finance podcast. I'm your host, Andrew founder of mastermoney.com. And today on the personal finance podcast, we're going to be talking through six of your questions on this money Q&A. If you guys have any questions, just join the MasterMoney newsletter. You go to mastermoney.com slash newsletter.

Starting point is 00:01:44 And any of those newsletter issues that come out every single week, you can ask a question based on those newsletters. Now, don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to how about the show, consider leaving a five-star rating and review on Apple Podcast, Spotify, or your favorite podcast player. Now today, we're going to be diving into six of your questions. The first one is going to be, should I buy Vanguard's VNQ REIT for easy real estate investing instead of using Fundrise? Question two is should I invest extra cash, pay off my boat in car loans or tackle my 8% rental mortgages first. Question three is, how do I save money for

Starting point is 00:02:23 my kids if I don't want a 529 and I want them to have the ability to use that money for anything, not just college? Question four, is tax loss harvesting worth it for regular index fund investors or should I just keep dollar cost averaging? Question five is, should I buy finance books now to learn more or wait until my emergency fund investments are set up? And then question six is I open brokerage accounts in my name for my kids. How do I transfer these to the them after without selling anything. So these are six fantastic questions pumped about this episode because we have a lot to get into. So without further ado, let's get into it. The first question is, hi, Andrew. I've been listening for a long time and I love the show.

Starting point is 00:03:02 I hear your advice on fund rise for real estate investing, but I have my accounts at Vanguard and I'm not interested in opening another platform. What's your opinion on investing in the Vanguard REIT, VNQ, to get real estate exposure without becoming a landlord? So this is a wonderful question. And for anyone out there who is listening who wants to simplify their finances, I like the way your thought process is because simplifying your finances is a huge key to being able to build wealth over time. And so that's really what you want here. And if you have Vanguard and you just want to have a Vanguard account, more power to you. There is nothing wrong with that whatsoever. So I'm going to kind of explain VNQ. And when I get into this, I'm also going to

Starting point is 00:03:41 kind of analyze it here live on the show. If you go to Vanguard's website, if you want to look at VNQ for yourself if you're not driving or anything like that. If you go to investor.vanguard.com, you can look at ETFs in their profiles. I do this a lot on some of the YouTube videos that I do as well, is we kind of go through and dive into some of these prospectus to see, you know, does this make a lot of sense to invest in overtime? So I'm going to show you how I'm going to analyze this to see a B&Q is even something. And I'm going to do this live. I haven't looked at it pre-show. I'm actually pulling it up now. And I'm going to do this live to show you how I would think about this. So if you're looking at REITs, Vanguard has fantastic rates. I already know that.

Starting point is 00:04:16 you know, just from researching in the past. And VNQ is no exception because if you look at this, it has an expense ratio of 0.13%. Now, the difference between REITs like Vanguard and then REITs with something like Fundrise is Fundrise is private real estate investments. So if you're looking to invest in private real estate investments, Fundrise may be the way to go. They also now, Fundrise also has private venture investments, which I think is a really, really cool thing that I've been looking more into is you can invest in venture capital stuff. So you can invest in stuff like OpenAI, for example, through Fundrise. And you can do this right now. You can literally go and invest in something like that or Anthropic, which is the clod.a.i,

Starting point is 00:04:55 which is a tool I love using all the time. You can invest in things like Canville or other stuff. But when it comes to investing in REITs, they are two separate, very different things. One is private, and then one is public. So Vanguard's is a more public asset. And so when we look at VNQ, we're going to look at a number of things here. First is the cost. Zero. Zero.13% on the expense ratio at the time recording this is very, very low. Now, what it does is it holds dozens of publicly traded REITs. So, real estate investment trust. So if you don't know what a REIT is, it stands for real estate investment trust. And it is a way for you to get real estate exposure without having to be a landlord, a fixed toilets. We've done an entire episode on REITs if you haven't heard

Starting point is 00:05:34 that one. Now, companies that own or manage real estate like apartments or offices or malls or data centers or storage facilities, those are what you were buying when it comes to REIT. So a lot of reits have big huge buildings. When you see these massive apartment complexes getting built, a lot of times reits are going to end up owning those over time. And so you buy it just like a stock or an ETF in your Vanguard account, which makes it super simple to invest in real estate without having to ever lift a finger. If you want that real estate exposure, it is a very easy way to get it done. Now, how does it give you real estate exposure? Well, Reets pay out most of their profits as dividends. And so VNQ can provide regular income plus long-term growth. And it's liquid.

Starting point is 00:06:14 So with real estate, when you own a property, you have to wait a certain period of time to be able to sell that property. Sometimes it can be a year or two years. If you're trying to sell your house right now at the time of recording this, it is very difficult to sell a property quickly because of interest rates. So you don't have the impact as much when it comes to REITs because it is very liquid. And you don't get tenant calls. You don't get calls for repairs or property taxes that you have to handle yourself. So if someone says, I want real estate in my portfolio, but I don't want to be a landlord or open. another account, REITs are a great way to go out and do this. Now, let's take a look at VNQ here for a second. I'm going to kind of analyze this a little bit more. So the year to date's returns are 2.81%. Now, what I like to do when it comes to this is a lot of times I like to analyze it against something like VO. So VO is the S&P 500. And I like to look at both just to see, hey, what would the return be if I just kept it with the S&P 500? So year to date returns on the S&P 500 at the time I'm recording this is 7.08% even through all that tariff stuff, it is still up 7.8% and VNQ is up 2.81%. Now, what VNQ invests in is stocks issued by real estate investment trust,

Starting point is 00:07:25 companies that purchase office buildings, hotels, and other real property. Now, the goal is to closely track the return of the U.S. investable market real estate index and offers high potential for investment income and some growth. Now, let's analyze this really quick and see what we got going on here. So it's been around since 2004, which I like. If you look at the inception date of VNQ, it's been around since 2004. And so that's a good sign because we can get the data for it for a longer period of time. I like stuff that's been around at least for a decade or longer, typically, and it's sort of something to definitely look into. The minimum investment is $1 through Vanguard. And at the time recording this, they have the market price, which is irrelevant to me.

Starting point is 00:08:03 So let's look at the returns over the course of the last couple of years. So year to date, it's 2.01% at the time recording this. For the one-year returns, though, are 10.41% for VNQ, and the benchmark is 10.4%. The three-year returns are 3.54%. The five-year are 6.5% and the 10-year are 5.9%. And so since inception, it has had a 7.3% returns. Now, let's look at VO for a second, okay? Just to compare.

Starting point is 00:08:34 So VO, over the course of 10 years, has had 13.6% returns, where as the REIT, VNQ, has had 5.93%. And since inception, VO has had 14.55%, whereas VNQ has had half that, so 7.43%. And so, sure, they are totally different assets. They are totally different asset classes, but you can see the drastic differences between something like the S&P 500

Starting point is 00:09:00 and something like real estate historically. Now, that doesn't mean that this is going to happen in the future, but historically, that is what we are looking at here. So if you want real estate exposure, it is definitely something that will have, at least historically, lower returns than what has happened over the course of its lifetime than the S&P 500. That doesn't mean you shouldn't invest in it whatsoever. That just means it is information that we want to think about as we look through this.

Starting point is 00:09:24 Now, VNQ holds 158 different stocks in its portfolio. And one thing I like to look at a lot is I like to look at some of the distribution of what is inside of this ETFs. And so this is actually very interesting because it tells you, What are the holdings in this ETFs and how is it weighted? So VNQ, which I like a lot, holds 13% health care rates. You know why I like health care reits? Because health care is not going anywhere.

Starting point is 00:09:49 In fact, health care is going up long term. And so I like when they hold a large portion of health care rates, meaning companies that own hospitals, for example, companies that own doctors offices. Those I absolutely love. They also own 13% retail rates. So retail locations, things like where your local grocery store. is or Walmart or your Target, they own retail rates. They own telecom tower reits. 11.5% is in a telecom tower reet. And it owns data center rates. So data centers, if you don't know right now, or a very highly desired piece of real estate because a lot of different companies

Starting point is 00:10:22 need bigger data centers and there's not enough of them out there. And so these data centers are big, big money for a lot of people in the real estate industry. So I like to see that. You know what else I also like to see is that there is low percentages in things like hotels and resorts because those are not recession proof. Don't like those businesses at all. There are low percentages in things like timber and single family residential reits. Self-storage reits is 6.4%. Real estate operating companies is only 0.10%. And that's a totally different business than real estate.

Starting point is 00:10:51 So I like how this is kind of structured. And for me, personally, if I was looking through this, I would say to myself, okay, well, it holds a decent holding here. Now let's look at the dividends because dividends matter a lot when it comes to REITs. And so right now, at the time I'm recording this, the dividend per share is 0.867 as of right now at the time I'm recording this. So that is decent, and that is, you know, around where some people want to be. And so I would kind of read through this stuff and say, okay, pretty interesting.

Starting point is 00:11:15 I think there are some things that you can look at here. And then you would look up ratings. So I'd go look up some ratings at somewhere like Morningstar or some other places. Vanguard obviously rates it on a risk-reward scale out of four, which is a pretty good risk-reward rating. And I would go look up some ratings. So if you go to Morningstar.com, they have this as a silver medalist and it has a three-star rating. So if you look at something like VLO, for example, just to compare the differences between what they rate that versus this, VOO is gold star and it is five stars. It is the cream of the crop, the top that you can get there. So it's just looking and comparing those two things and thinking through, does this make sense for me? Now, is there anything wrong with investing in this compared to something like Fundrise? Not at all. Vanguard has some of the best, you know, funds out there when it comes to some of this stuff. So if you do your research and look into this, it's solid choice for anybody who wants to have some real estate.

Starting point is 00:12:05 exposure and looking into REITs is a huge, huge thing. And if simplicity and convenience is your priority, there's nothing wrong with V&Q whatsoever. So the other key things to know is that it pays out dividends that can be taxed at your ordinary income rate if it's held in a taxable account. So holding something like this in like a Roth IRA or a traditional IRA can be tax smart. I would talk to your CPA about that. And it won't exactly match fund rise returns on diversification into private projects. But for most investors, it is plenty, and I mean plenty of real estate exposure. We talk through all the things and all the projects that it works in. Love that about it. So great thought there. I hope this analysis wasn't overkill, but I wanted to

Starting point is 00:12:44 kind of show you how I think about this stuff and how I look at it. So just let me know if you have any other questions. And if you like me breaking it down deeper like that, let me know as well. All right, the next one is, hey, Andrew, I'm 36, long time listener. Thank you for all the lessons. I own my home outright paid off. Amazing. But I do have rental properties with mortgages. One reset to 8% interest and the others will soon. I also have a boat with 2,500 left at 9.5% interest and I just got a new car. I was 30,000 on that at 4.74%. My question is, with my extra cash flow, should I focus on investing in index fund, paying off the boat or car, or aggressively paying down the rental properties? So, wonderful, wonderful question. And first of all, let's celebrate that paid

Starting point is 00:13:27 off home. That is a great, great accomplishment. That is absolutely huge. And it frees up cash flow that gives you a solid foundation that most people don't reach until their 50s or even later. So absolutely amazing that you were doing that in the way that you're thinking about this. I also love that you have rental properties. I think that's absolutely amazing. And some of these properties look like that you are doing some cool stuff with them. So really excited to kind of dive into this. Now let's look at your debts in order by interest rate.

Starting point is 00:13:53 Okay. First, let's look at your boats. You have a boat at $2,500 left at a 9.5% interest rate. This is high interest in my opinion. anything above a 6% interest rate, in my opinion, is pretty high. The car is at 4.74% and it's $30,000 borrowed. So it's at moderate interest. It has a lower interest rate for what we typically see nowadays, great rate on that. And then you have the rentals and some are going to reset to 8% high for mortgages. So the rentals I actually separate out from your personal finances because I

Starting point is 00:14:21 see those as a business. And so if you have these rental properties, we're going to separate those out and think about those different. And we'll talk about that here in a second. So first of all, before investing, the boat needs to get paid off, is my opinion. So A, it's a small balance, so you can actually snowball this thing and get the boat paid off at $2,500 at that 9.5% interest rate. That would come first. And then, once that boat is paid off, then I would start to look at some other things. First, then I'd probably go start investing in index funds. Why? How did I come to that conclusion? Because if you look at the car, the car interest rate is 4.74%. You can make those minimum payments and kind of move on. The rentals are something we're going to,

Starting point is 00:14:57 to talk about here in a second. So let's think about this for a second. If you are cash flowing on your properties, meaning you're making enough that makes sense for you on those properties and they are also covering the new interest rate, then I think it works for you. If they are not cash flowing anymore because of the new interest rate, that we need to reevaluate owning those rental properties. Because if they do not cash flow, what is the purpose of owning them? Unless you bought them for appreciation, which is a risky play, the only reason why I personally buy real estate is for cash flow. But if you bought them for a different reason, then maybe you can hold on to them. If they do not cash flow anymore because of that interest rate, then there's two things you can do. One is you can sell one of

Starting point is 00:15:35 them off, take the equity and pay off some of the other ones, or you can sit there and sell a couple of them. Secondarily, though, if they do cash flow, then you just hold on to the rental properties and let them cash flow while they pay the higher interest rate. And so it's kind of deciding running the numbers again on your rental properties with the new interest rate and deciding if they work. Now, we have a rental property calculator if you want one. I think we have it linked up down below in the show notes. But I would definitely look at those rates. Secondarily, though, with those 8% interest rates, I would shop those because right now,

Starting point is 00:16:05 interest rates should be a little lower for a lot of people. I know it's a rental, so it's a little tougher. But if you can shop it and find a lower interest rate, it may be worth your time. And maybe you can package or bundle them together as well. That may be something that you can do and be able to make it make sense. Now, the way to make it make sense is to ensure that your closing costs do not cost more. and what you are saving when it comes to refinancing. That is the big key there.

Starting point is 00:16:28 And then C is evaluating that car loan. I think the car loan is completely reasonable. That is a great rate, probably because you got a new car. So this is kind of the, there's no urgent payoff on the car loan currently. I would be investing those dollars instead if it were me. And so that is something I would not think about, you know, paying off too too fast as time goes on. And then after covering some of those high interest debts, then I would start to automate into some of the investments that you're interested in.

Starting point is 00:16:52 So if it's index funds, that's great. if it's more real estate, that's great. But starting to automate and dollar cost average into those is going to be really, really big. If you don't have any index funds yet, diversifying into them would be great, but making sure you also have that emergency fund in place with the 136 method is huge. So at least having three months of expenses before you start investing is the other big key in your emergency fund. So just making sure that that is prioritized as well. So let me give you a quick action plan again, just to summarize. I pay off the boat today as fast as you can. Then I would review refinance options for the rentals. And if rates stay,

Starting point is 00:17:24 high, just make extra principal payments to reduce the 8% loans faster. Then I would keep paying the car loan normally or slightly extra, not urgent whatsoever. And then I would invest any leftover cash flow into index funds every single month and protect your cash buffer as a landlord. Make sure you have that cash buffer in place. That is always, always, always really important. But number one is very simple. Boat needs to get paid off. Then you can go from there. So I hope this helps. You are doing amazing at 36. Keep optimizing and building that massive wealth. love, love, love to see you guys investing in all these different areas. I think it is so incredibly powerful.

Starting point is 00:17:59 So great job and keep up the good work. All right, the next question is, hey, Andrew, I love your podcast because your steps feel realistic for normal families. Thank you. Thank you so much for the kind words. Those always make my day. So thank you so much. I'm trying to save for my three kids.

Starting point is 00:18:13 They're 13, 9, and 8. And I've hesitated with a 529 plan because what if they don't go to college? What if they get scholarships? Or what if they want to buy a car or a house instead? Their dad works a trade job making six figures with no degree. So I know college might not be for everyone. How do I save money for them that they can use for any big goal in life, not just college? I make about $50,000 and do this on my own.

Starting point is 00:18:37 So it's small but important to me. What's the best alternative for minors besides a 529 plan? So there's a bunch of great alternatives here that we'll talk about right now. One thing I will say about the 529 plan is that it can be, there is a little loophole that just passed over the course of the last couple of years. And what you can do is save up to the $35,000 limit. Now, why is this $35,000 limit matter? Because you can start to invest in a $529 plan.

Starting point is 00:19:03 If they don't go to college, you can roll up to $35,000 per child into their own custodial Roth IRA. And so this is something that helps you get money out of a $529 plan if they get scholarships or if they decide they don't want to go to college because, again, you're right. College is not for everybody. And so that is a great way to be able to get some money out of a $529. plan if you still want to go that route and you like the benefits of it. But there are some other accounts that you can consider. One is a custodial Roth IRA. So the custodial Roth IRA is something where

Starting point is 00:19:33 they have to have earned income before they can invest in that custodial Roth IRA. But if they do have earned income, you can contribute up to the amount that they earn. So if they earn $1,000 per year, you can put $1,000 into that custodial Roth IRA and that will give them that tax-free growth and get them started at a very early age, which is really, really powerful. But second, Darily, if you do not want to go that route because you don't want to lock their money up and you want them to be able to use it later on like it sounds like you do, then you can look at some other options. So the other couple options are, A, you can put it in a taxable brokerage account. I do this for my kids. So my kids, money goes into a taxable brokerage account when they get money for birthdays and I also put $100 a month each child into these accounts. So when that money goes in there, what they do is that we invested over time and then we make them the beneficiaries. So the taxable brokerage account, is in my name, and then they are the beneficiary. So if I pass away, the account just gets handed down to them. We have a question about this in a second.

Starting point is 00:20:30 And so that is kind of how we have that structured. But the reason why I do it this way is because I don't have to give it to them at a certain age. And the restrictions of having to give them the money at a certain age is something I just never really loved. Where as with some of these other options I'll talk about, you have to give it to them at a certain age. That's just my personal preference. I know I'm going to have to pay a little more in taxes for this situation. but I am okay with that for the flexibility of a taxable brokerage account. There are another couple of options, like a UGMA or a UTMA, and it depends.

Starting point is 00:21:02 Some of the rules depend on your state, but you own it as a custodian, but it legally belongs to your child, and then you invest the money in index funds or ETFs or keep some cash, and then where your child hits the age of maturity, which is, depending on the state, it's either between age 18 and 21, the account becomes theirs, and they can spend it on a car, a home, a business, anything they want to do. And so the thing about the UGMA is that the money has to go to them at those certain ages. It is legally theirs no matter what when you start investing in it. Whereas with a taxable brokerage account, if you have a kid who goes off the rails or a kid who is out there,

Starting point is 00:21:36 you know, just doing the wrong things, they are not making wise choices. That's something where you can't hold off the money from them. So that's why I like the taxable brokerage account is just because it gives you flexibility. And my thought process is always, hey, somebody might just get a little too wild for your boy. and so I want to make sure that I can hold that money a little bit longer. And there's a lot of other, you know, little nuances to it as well. Now, they are flexible because they can be used for college and or a house or a down payment. And you can invest it for growth.

Starting point is 00:22:04 And you can control the money until they become adult at least age 18 to 21. But they get full legal control between age 18 and 21. So that's why I never go UGMA or UTMA just because of that one caveat. I don't like the age restriction. I wish I could give it to them, you know, later on down the line. even if it was 25, I would be more likely to look at it. I just think about myself when I was 18. And I did some really stupid stuff with money.

Starting point is 00:22:27 I did dumb things with money when I was 21. I did dumb things with money when I was 22. I've talked about the story before, but like when I was 19 or 20 in college, I put all of my money into one penny stock because I didn't know what I was doing yet. And so that is just a decision that I probably, if I would have had more money, I would put even more money into that penny stock. And it's something where I think about that and I was just a knucklehead. And it's just one of those things that I can see happening.

Starting point is 00:22:49 you other people. But there's a lot of kids out there who are probably a lot smaller than I was at that age. So if you know your kids and if you see that they are making wise decisions, then there's nothing wrong with a UGMA or a UTMA. So you can have a couple of options. You can do some of it in the 529, roll it to the custodial Roth IRA and or you can just go forward with a taxable brokerage account or a UGMA or a UTMA. And we'll do a full episode kind of outlining this on some kids accounts. We're also going to have a full course on this in the Master Money Academy coming up here when that is released. So really excited for that.

Starting point is 00:23:23 If you don't know what that is, that's our community where we are going to have a bunch of like-minded wealth builders, all of you. We're going to take you step by step on how to build wealth and beyond that, how to build generational wealth for you, your family, and your future. So there's so much cool stuff we're doing in there and it's going to be really awesome. So I'm just super excited about it. So I talk about it a lot. Anyways, so that is what I would do.

Starting point is 00:23:45 Amazing that you are thinking about investing for your kids and building wealth for your kids. is going to be so cool to see that over time. You are doing amazing. You keep it going. Congratulations again on doing this. This is really, really cool. And awesome. That's the thing about college not being for everybody is I know so many people now who are in blue collar industries who are making over six figures like your husband. And I think it's just so incredibly powerful what you can do with certain skills. And so I think that is just another added benefit. You college is not for everyone. And I know people just like this who are interested in other things. And I absolutely love it. So thank you again for sending in the question.

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Starting point is 00:27:45 who doesn't own a business. Or should I just stick to dollar cost averaging into index funds and ignore it? I would love to hear your take in an episode. So this is a great question, and I think that for a lot of people, tax loss harvesting comes across and they're like, should I do this?

Starting point is 00:28:00 Should I not? And it's actually kind of difficult to figure out if you should or not. So I'm going to outline kind of what this is and I'm going to talk through what I think most people should do. So in simple terms, what is tax loss harvesting? How do I make this as simple as possible? It's when you sell an investment that's lost value

Starting point is 00:28:14 to lock in that loss. Then you use that loss to offset other capital gains in your portfolio so that you can pay less tax on those gains. Or if you have no gains, you can reduce up to $3,000 of your ordinary income per year with losses. And then any leftover losses carry forward in future years. So let me give you an example to make this easier and allow it to hit home. So let's say, for example, you bought a fund for $10,000 and that fund drops to $7,000. And you sell the fund to take a $3,000 loss on that investment. Then you reinvest in a similar but not substantially identical fund to keep your money in the market.

Starting point is 00:28:53 Now, what happens here? That means that when you sell that, you have that loss that can offset some other gains that may have been happening within your portfolio. We've had a lot of gains over the course of the last two decades. And so for a lot of folks out there, they might have a lot of gains in their portfolio and they're trying to offset this loss. But who benefits the most from tax loss harvesting? Well, it makes the biggest difference for people who are high earners in high tax brackets because

Starting point is 00:29:18 they are going to have high tax bills that they need to get reduced as much as they possibly can or people with large taxable brokerage accounts. So if you have a very large taxable brokerage account that just continues to get larger over the course of the last couple of years, that is going to be someone who benefits and investors who often realize big capital gains like selling rental properties or individual stocks or large chunks of ETFs. Those are the folks who are going to benefit most. So if you have big accounts, big benefits for those who have big accounts. Now, here's who is who is less impactful for and who doesn't really have to worry about this as much, is if most of your money is in tax advantage accounts like your 401k or your Roth IRA or your

Starting point is 00:29:57 HSA, it's going to be less impactful for you. Also, if you're a buy and hold index investor who rarely sells, it's going to be less impactful for you right now. And if you don't have big realized gains to offset, then you don't need to be tax loss harvesting. Like if you have a portfolio that's just getting started, There's no reason to tax loss harvest currently. Now, is it worth it for most DIY investors out there? Honestly, it's probably not usually worth obsessing over. Why?

Starting point is 00:30:23 Because if you hold broad-based index funds for the long term and you rarely sell, you don't generate taxable gains that need offsetting typically in most scenarios. And most index funds are going to trend upward over time, and temporary dips may not be worth the hassle of selling and swapping, depending on how big the dip is. Now, the only way you could really offset those losses is, is like when the tariffs were issued and we had that big pullback or when COVID happened, we had a big pullback or 2007, 2008.

Starting point is 00:30:48 Those are places that you could sell and swap. But it adds paperwork and you have to track replacement funds to avoid the wash sale rule, which cancels your losses if you rebuy to soon. So when might it be helpful for people out there? So if the market drops a lot, like again, 2020 or 2008 and you have big unrealized losses in a taxable account, you could harvest once or twice. or if you want to rebalance anyway. So selling or losing positions can help if you want to rebalance anyway. And many robo advisors like Betterment or Wealthfront can do this automatically for you

Starting point is 00:31:19 so you don't have to really think about it. So that's the big pro tip of robo advisors. They do this for you to optimize for taxes. It's a little bit harder when you're doing it DIY. And so the way I kind of think about harvesting is if I'm going to rebalance my portfolio, like meaning 6040 portfolio, 60% stocks and 40% bonds. Well, if you're going to rebalance every year, that's the time to harvest. is to harvest and rebalance at the same time. Kill two birds with one stone. So the market takes a dip. Then you could start to rebalance off that dip and start to move those funds over.

Starting point is 00:31:49 That's kind of how I think about it is just killing those two birds with one stone. But you don't need to be doing it if you are someone who is just kind of letting the wealth engine run, long-term compounding, that kind of stuff. Now, if you do try it, here are some tips, is to make sure you're using different funds to avoid that wash sale rule. Very important. So if you sell VTI, for example, which is Vanguard's total stock market. index fund and you want to buy something else. Look at something like, you know,

Starting point is 00:32:13 SCHB or something very similar, but not substantially identical. That is the key. And then harvest meaningful losses, like not something less than $1,000. Don't sweat some of those tiny dips. And then keep records because you're going to need them during tax time when you use TurboTax or your accountant is going to want them as well. So the key takeaway here is for most everyday investors, focus on investing more, staying the course, and letting compounding do the work instead of tax loss harvesting. When you try to optimize on this stuff too much. It just gets too complicated. And so if you like it, if you want to do it, absolutely fantastic. But if you don't and you're just like, I really, you know, I don't think this is for me.

Starting point is 00:32:48 You don't have to worry or stress or sweat about it. Listen, I hope that helps. And congratulations on getting your investments going. I think that's absolutely amazing and really cool that you are enjoying the podcast. Thank you so much for being a listener. And thank you so much for the question. It was absolutely fantastic. All right. The next one is, Andrew, I love your podcast. The information has really helped my wife and I finally make a plan to break the debt cycle. Well, that's absolutely amazing. And for the first time ever, we have hope to save and invest even though we are starting at age 43. Well, I cannot tell you how much that makes my day because part of our core principles and our guidelines here at Master Money is we want to give people hope. And that is part of the key to what we do here.

Starting point is 00:33:30 So I cannot thank you enough for mentioning that. So it says you always mention books to level up financially. should we start buying books and learning more about investing now or wait until we have an emergency fund built and some investments going? We're so excited to be on the journey, but also no, we're still vulnerable. Any advice helps. So absolutely should be starting looking at books now. But first of all, huge congrats on taking control at age 43. I think that is absolutely amazing. And a lot of people never break out of the debt cycle and you are taking action to do that. So the fact that you have a plan at 43 is a huge, huge deal. And there's no such thing as too late as We've talked about a ton on this show.

Starting point is 00:34:07 So you've got plenty and plenty of runway to build wealth. Trust me. So this is going to be really cool to see what you do. So when it comes to financial education, yes, but be smart about it. So for example, in the Master Money newsletter, we have books that we kind of talk about that I read every single week. And there have been books that I have read in the past that have harmful information in there that I will not put in the newsletter.

Starting point is 00:34:27 So you may see me repeat the same book two weeks in a row in the newsletter, which is rare, but we do do it sometimes. And the reason is because the book I read that week had some information. and I did not want the rest of our master money community to be able to be susceptible to some of the lies that were in some of those books. And so because of that, making sure you're smart about your financial education is really important. For you, I'm going to recommend a couple of books that I think are going to help you a lot as time goes on that. I want you reading while you're starting to build up that emergency fund and starting to pay off debt and all that kind of stuff.

Starting point is 00:34:58 So one is the simple path to wealth by J.L. Collins. I will recommend this till the cows come home. But this is the plan. I mean, this plan you can unfold. You can to do it right now for financial independence and be able to become financially independent in a very simple way. Number two is a book called The Millionaire Next Door. Now, I've done an entire episode recently. You've probably heard me talking about some of the principles in the millionaire next door, and I believe anybody in this world can build wealth and they can become a millionaire next door. And it came from that book. I highly, highly recommend that book to anyone who is interested in personal finance. Number three is I Will Teach You to Be Rich by Ramit Sethi. It is a wonderful, wonderful book.

Starting point is 00:35:35 that teaches you how to build wealth. And the second, I would get the updated version, which has a lot more updates on the investment side and some of the things that you should be doing there. Another fantastic book. Number four is Get Good With Money by Tiffany Aliche. Most of the people have been in the show, by the way. But she breaks down how you can really make a huge impact on your money

Starting point is 00:35:55 by following the 10 steps of getting financially whole is what she calls it. And so I love, love, love how she breaks all of that down. And then lastly, to give you one other one for mindset shifts is something like rich dad, poor dad. Now, Rich Dad, Poor Dad and Robert Kiyosaki, the author has kind of gone off the rails a little bit in terms of like how he thinks currently. But when he wrote that book, that's an amazing book and really enjoy it just for mindset shifts. So those are five that I would consider up front that you can think about.

Starting point is 00:36:23 And then as you're building up that starter emergency fund, if you read those five books alone, you'll have a better financial education than most people. And then I would start to kind of scale up from there. So congratulations again on your journey. I would, you know, pick the first book, keep it plain and simple. I would highly recommend the simple path to wealth as your first book. And then kind of build your emergency fund, work on killing that debt and then start automating those investments ASAP and you will be well on your way. So congratulations again. I absolutely love it and love to see the work that you're putting in and can't wait to hear about your journey. So please, please, please keep me posted. All right. The last question is, after listening to your podcast about starting brokerage accounts for kids, I open one. one for each of my daughters. The accounts are in my name, and now I'm not sure how I'll actually transfer these accounts

Starting point is 00:37:08 or if it's even possible. Well, I have to sell the accounts to give them the money. So good news. First of all, congratulations for investing in your daughters. It's absolutely amazing that you actually did that. So the first thing you want to do is make sure that they are the beneficiaries of these accounts, meaning that there's a little section in each of your account where you can go in there and name the beneficiary.

Starting point is 00:37:29 So that means that's who this account's going to if something were to ever happen. to you. Very important. This is like estate planning 101, but every single person in this podcast, if you have an account open somewhere, you need to identify a beneficiary because that account is going to have a big issue on who it's supposed to go to if you don't identify the beneficiary. So first, number one is identify them as the beneficiary. Now, when you want to give it to them, there's a couple of things that you can do when to do this. So number one is you can keep it in your name until you're ready. So you just keep investing. And when they're older and ready, you have two ways to give it to them. One is you can sell the investments and give them the cash,

Starting point is 00:38:05 or two, you can gift the shares directly. Your brokerage can help set up transfer shares, but you'd handle the paperwork. And if you sell, beware of capital gains taxes because you'll pay that when you sell. And so you can do one of those two things, sell the investments or give the shares directly. Option B is you can leave it in your name and just help them open their own account later. Now, this is what many parents do, is they keep it 100% in your name while they're minors. Then when they're adults, help them open up their own brokerage account. and then give them a chunk or transfer some of the investments directly as gifts. It's simple. It's flexible. There's no forced ownership or control issues.

Starting point is 00:38:39 But what you don't want to stress about is liquidating now or you don't need to open special child specific accounts if you prefer not to. But just know for taxes, the gains are yours until you sell or transfer. Now, one thing I like to do with these accounts too is I like to show my kids kind of what I'm doing. And so each year or every couple of months, I'll go in there and kind of show them, hey, we're investing some of these dollars here just so they understand. how this works on a smaller scale. And it's just cool to kind of see their eyes open up on, you know, what each dollar can do and how much it can grow and how powerful it is. My kids are young. So just trying to teach them in very simple ways. And I think we're going to be coming out

Starting point is 00:39:15 with some kid specific content when it comes to teaching financial literacy for young kids. And so that might be coming out soon too as well for anybody who is interested because we're excited about that. So really, really cool stuff coming down the line here. But that is the simple way to do it is a make sure that the beneficiary so if something happens to you it goes directly to them b is then you can transfer it to them as a gift and transfer the shares over directly and your brokerage can help you with that if you don't want to do that though you could sell those those shares and then send them the money to their other brokerage account is the third option so those are the three things to consider and let me know if you have any other questions on that i truly appreciate the question

Starting point is 00:39:50 and again congrats on opening this up for your kids that is so incredibly powerful listen thank you guys so much for listening to this episode. If you guys have questions again, join the Master Money newsletter and you can respond to any of those newsletter issues that come out each and every single week. I cannot thank you guys enough for being here and investing in yourself. It is so powerful to see how many of you are here listening and cannot thank you enough for being here. Again, get ready. The Master Money Academy wait list is going to be coming up soon. If you want to join Master Money Academy is going to be the way that you can get the most access to me. And we are going to do a lot of live workshops. We're going to be going through the

Starting point is 00:40:25 success path for a lot of you step by step on how to build wealth. We're not have a lot of courses in there, including Index Fund Pro and Master Your Money Goals. All of that is going to be included in Master Money Academy. So that is coming very, very soon. So get ready, gear up, and can't wait to see you in there. Thank you again for listening and we will see you on the next episode. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play. Feel the fun with Playojo. The online casino with all the latest slot and live casino games. What you win is yours to keep with no wagering requirements, instant payouts, and no minimum withdraws. Hey, I just won. Woohoo! Feel the fun! Play, oh Joe! Honey, forget about the lasagna. Let's celebrate!

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The Personal Finance Podcast - Should I Invest in REITS? (Money Q&A)

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