In this episode asset allocation is the topic on why it’s not good to put all your eggs into one basket. This hold true as a business owner, investor in stocks, bonds, real estate, etc…

If you're looking for a trusted source to help you stay on top of the ever-changing financial world of investing, retirement and estate planning, and asset protection, whether it's for you and your family or your small business, you're in the right place. This is the 1715 Treasure Coast Financial Wellness Podcast, where we'll keep you up to speed with the latest market news and conditions every week. Now here's your host, Thomas Davies. Well, hello, and welcome to another edition of the 1715 Treasure Coast Financial Wellness Podcast.

My name is Thomas Davies. I'm a wealth advisor here in Stewart, Florida, and welcome. It's been a little while, and to those that are my avid listeners, I apologize for not being on the air, but we've been busy, and as a solo practitioner, these podcasts do take quite a bit of time to put together. So anyway, welcome, and glad you're here.

We are in season two. This is episode number six, and we've got a great show for you today. I'm going to talk about quite a few things, and I would be remiss if I didn't say just this breaking news that came in today, that my thoughts and prayers are out to the families of those lost in the Titanic submarine. If you've been following it, it appears that the sub did implode.

A lot of conspiracy theories out there as far as not being made well, and one of our favorite shows, Expedition Unknown, Josh Gates denied going on that ship down to the Titanic, and certainly glad that he wasn't on board because we enjoy his show. So anyway, like I said, our thoughts and prayers go out to those families, to their loved ones that lost them. So anyway, let's get going. So big news coming out last week.

The Fed came out and hawkishly paused interest rates. This is good news as far as if you're out there trying to go to buy some things, because the interest rates certainly have risen. Getting is expensive. When you go to the store, things that you buy, the consumer goods, just anything and everything has gone up.

What was $10 is now $15, what was now $15 is $20, and so on and so forth. Really feeling the pinch out there in the economy, and that's going to show up. At some point, that's going to start showing up in the economy, and most economists and analysts are talking later this year. Like I said, those of you who are out there listening, I'm sure you've noticed that everything is just more expensive.

Mortgage rates as of today, a 30-year mortgage is up around 7%. And if you're out there shopping for a new car, to your surprise, you're going to not see those 0%, 2%, 3% financing, although there are some out there. And if you are looking for a new car, jump on it, because the rates, regular rates are up around 7% and even 9% to buy that new car. And credit cards, forget about it.

We're seeing 29.99% and higher based upon your credit score. So if you've got credit card debt, pay it off, stop using them, and get rid of it. It's just something that you're going to want to do. Well Florida home prices seem to be still stable.

As the rest of the country, home prices seem to start to be going down. There's about three months of inventory, I'm being told, and that is still a seller's market. The national average, I guess, is about six months of inventory to make it even where it's good for buyers and good for sellers. A year ago today, there was about a month and a half worth of inventory, and now it's up to three months.

But if you're in Florida and you're a homeowner, your home price is stable. If you're looking to move and looking to sell, right now may be the time to do it and get out. So the move is on. People continue to flood out of California, New Jersey, New York, and Pennsylvania.

And where are they going? Well, as here in Florida, we know they're coming here, and actually we came in at number two, and it seems that Texas is number one based on one-way rentals for U-Hauls. That Texas seems to be leading the way as far as people coming in. It's just the way it is.

People want tax-free state with no state income tax, and Florida and Texas are leading the way. So where are we right now in the markets? Well, they rebounded nicely here over the last few weeks. The anticipated pause that most people thought we were going to get, we got, and so the markets have rallied on that a little bit, going to earlier highs in the year.

This was before the Silicon Valley Bank collapse, so that's certainly good news. Bitcoin makes a return to $30,000 as of today. We're seeing the cryptocurrencies raise in rates. And so with that, we're going to get into a little bit on our subject today, which is going to be asset allocation and how to diversify your portfolio.

So asset allocation. What is it? Fancy word. Don't put all your eggs in one basket.

That's really what the basis of it means, is that you're not investing in just one thing, one item, one fund, one stock, one particular investment. Asset allocation means that you are allocating your assets, your money, into a pool of different assets, and those assets could be stocks, they could be bonds, they could be ETFs, they could be mutual funds, maybe you own a little real estate, maybe you also own a business, and also crypto, if you're interested in crypto, and also gold and silver. So those are some of the basic assets that people own, and you just don't want to have everything 100% into any or all of those one particular assets. So I'll talk about stocks, the first one.

You want to follow what the institutions do, and what they do is in their funds, whether they're mutual funds or ETFs, they don't invest all their money into one particular stock. One because they're trying to diversify their portfolio, and generally that rule of thumb is about 2%. So when you're building your portfolio, you don't want to put more than 2% into one particular company. Well why is that?

Well if that company goes under, it's only 2% of your portfolio. So when you're buying stocks and you're picking them, and you're looking at your total portfolio, you really don't want to put more than 2% into any one particular stock, and that's really just following what these big institutions do. If you go to Morningstar or Yahoo, and you look at the ETFs, and you look at the breakdown of their allocation, generally it's going to be anywhere from 1.5% to 2%. There are some ETFs and some other investment companies that invest more than that 2%, but generally if you look, the majority of them are right at 2%.

So that's a good rule of thumb to follow. Also with bonds, it really shocks me how many people I talk to that just don't understand bonds and how the bond market works. And with interest rates right now at 7% or more on some of these corporate bonds, I know for my clients, the last probably 4-5 months we've been adding to the bond portfolio as interest rates have risen, it's been a great time to go in and just add some of that bottom layer that produces income into the portfolio, and they're getting anywhere from 5% on municipal bonds up to over 7% on some of the corporate bonds, and it's a great time to really go in and look at the bond market and add some of that fixed income, and if the Fed continues to raise rates, it's just going to create more opportunity in the fixed income market. You can go out and get a one-year CD now that's going to pay over 5%.

Money markets are yielding 4-4.5%. So if you have money just sitting in cash doing nothing, go to your bank and ask them or your financial advisor and say, is my cash in a money market? Am I getting at least 4-4.5% on my money in the money market? So the raising of rates hasn't been a terrible thing for those in the fixed income market.

It's actually been a wonderful thing, especially for people on a fixed income. You think of your seniors that really just have no risk in their portfolios. Now they can go to the bank, they can get a CD that pays 5-5.5%, and if you go back to some of my videos, unfortunately it's not really outpacing inflation, but over time if you buy a longer CD or you buy a longer bond, as inflation, which they hope to get down to 2%, you're going to outpace inflation. So the fixed income market is really a great place to look.

Bonds, they trade very similar to stocks in the bond market. They have a bid, they have an ask, there's a market for them. You know, if you have questions, call me, I'll certainly answer those questions, but there's a lot of opportunity in the bond market to make money there also without the risk, added risk, of being in a stock. So I'll save another podcast to talk about bonds and how they work, but it's just a great opportunity.

So with that, you know, with the higher interest rates, you know, there's going to be real estate opportunities. I talked about how right now it's kind of more of a seller's market than a buyer's market. Well, that's here in Florida, but they're also outside the country in some of the other states. You know, real estate prices have come down, and so that's always a great add into your portfolio.

A lot of times I get the question, I'll have clients come in that own rental properties and they say, well, if I sell my rental property, what are you going to do with my income? Well, let's back up and we'll just look at those bonds. Or you can buy what's called a REIT, which is a real estate investment trust, and a lot of those generally yield about 10% a year just to own them. So if your rental property is not making over 10% a year, at the end of the day, you may want to look into just a real estate investment trust.

You own it. You do nothing except hold it in your portfolio and you get the yield. Now, of course, there is risk, you know, to those underlying mortgages, and once again, you know, talk to your financial advisor or give me a call and we can talk about real estate investment trust. But this is another way to add income into your portfolio.

For me, I don't like being a landlord. I don't want to own rental properties. So what I do is I'll buy a real estate investment trust that manages those real estate investments in the trust and have property managers, and all those fees are billed in, and generally you can look at the different REITs and see what the underlying charges are, but once again, you know, they pay anywhere from 10 to 12%, you know, on your money. So something to look at, but real estate is definitely a great add, even if it's just adding a piece of property to hold, if you can afford it.

They're always good long-term holds. Real estate, unfortunately, unlike a bond or a stock, you can't just press a button and get the money out. So that's kind of the downside of real estate is it's just not easy to liquidate and it's not liquid. So that's a little bit about real estate.

You know, probably the other thing I want to talk to you is if you're a business owner, don't put 100% of your money in your business. What if your business fails? You may have a great business and it may be great right now, and I hope it stays great for a long, long time, but if you're putting 100% of everything you make back into your business, and man, I know a lot of business owners that do this, okay, you just can't do that. You have to diversify your assets.

If you're making some money, even if you're just starting 1% of your income, start tomorrow. You know, start this week. Take 1% of your income and start diversifying it into some of the things that I've talked about, stocks, bonds, ETFs, mutual funds, buy a CD. You know, if you got $1,000, take $1,000 and go buy a CD.

Start taking some of the money out of your business. You can't put 100% back into your business because once again, if it fails, where's your other streams of income? So you know, I love business owners. They're great clients and I always try to emphasize to them, pay yourself first.

It's what our parents have told us, don't forget to pay yourself first. So once again, you know, own a business. It's a great asset to have businesses, own multiple businesses if you can, but don't forget to pay yourself first. Crypto I'm not going to go too far down the crypto hole other than, you know, you can add some of it to your portfolio.

Maybe you don't add any of it. You know, the Bitcoins, the Ethereums, you know, are probably the ones you're going to want to add. They're the most well-known that are out there. Anything else than that or anything other than that, I'm not going to talk about.

But you know, if you wanted to add a little Bitcoin, you know, Web3, look into it. You know, I have some clients that are ecstatic about crypto and they believe it 100% and it's the way of the future and they just, they feel that they don't want to miss out on it. So, you know, it's okay to add a little bit of it. I'll use the stock rule, no more than 2%.

You know, if you want to have more than that, then, you know, you're adding a lot more risk into your profile. And lastly, I talk about gold and silver, generally, you know, a lot of times I'll get that question also, gee, should I go buy some gold or silver to hold on to? You can buy the ETF, GLD or GOLD if you don't want to hold the physical bars or physical gold in your house because it's a security issue. But if you do want to buy gold or silver, generally, it's held to fight inflation.

So if inflation's coming down, you would think that prices of gold would start to come down, which they have from their highs along with inflation. But is it good to have? In your portfolio, in part of your asset allocation, absolutely. Once again, you want to, you know, you want to have your assets diversified.

They do need to be managed. You can't just forget about one particular asset. They all have to be managed and so that's why we have managers in all the different fields whether it be real estate, stocks, bonds, business managers, property managers. And if you manage it all yourself, then you're doing all the work yourself.

But hopefully that gives you a little history and a little education on asset allocation, why it's important to have a little bit of everything working for you. That way if one fails, you know, you have something else that's working for you. You know, the old saying is that you want three streams of income, right? So if you own a business, you own some real estate, you own some stocks and bonds, those are ways to get income coming in if one stream stops.

So hopefully that's helpful. Once again, sorry for the lag and delay in putting a podcast together. I hope you found this informational and educational and I will certainly be back next week. We'll have a little bit more news.

Eyes are on the Fed. They said they're not done hiking rates. We will see. It's summertime.

I hope you're out there enjoying the sun. It's hot here in Florida. Get out on the beach. Get out on the water.

Have some fun and enjoy those trips with the family and loved ones and we will talk to you and we'll see you next week. Thank you for listening to the 1715 Treasure Coast Financial Wellness Podcast. If you enjoyed this episode, share it with a friend who might like it and please rate, comment and subscribe. If you'd like to contact us, find more information or if you'd like to keep up with us on Facebook, Instagram, Twitter or LinkedIn, check out our website at www.tdwealth.net.

Have a great day and we'll talk to you next week.