Best of Caller Questions - 3/12/2025
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This is a special InvestTalk Best of Caller Questions compilation program. Remember, the InvestTalk phone lines never close. Please call with questions. 888-99-CHART. 888-99-CHART. They will be played and answered on an upcoming InvestTalk podcast.

Let's go take a live call. James from New York asking about his 401k. Yeah, I often hear you say that an employer has a fiduciary duty to its employers to provide an adequate service.

best possible plan. If I'm a member of a union of tens of thousands of people and just say there is one person who finds that the plan is not adequate or to their liking and that it can be better, is that sufficient to make a change in the case of an individual? Is that a possibility? Well, that one person could sue, right? And there's legal costs around that.

You know, it probably more of a group of, you know, a group of employees suing and finding reason for that. Once again, I'm not a lawyer in that sense. But, yeah, I mean, they do have a fiduciary duty. So somebody could sue the employer for breach of their of their fiduciary duty. And usually this is around.

you know, providing a plan if it's, you know, too high and fees doesn't provide the adequate investment options for you, you know, and that's not just fees around the investments. It could be fees on, uh,

how to maintain the cost of maintaining the plan and being passed on to you as well. So, you know, you probably don't want to sue just one person. You know, you probably want to put pressure on management and point out, you know, here are the problems with our plan. These costs are too high or we don't have these investment options or we don't have the ability to do X, Y, and Z. And then you can put pressure on them to, you know,

And remind them that they do have a fiduciary duty to listen to you and make changes that are necessary. Okay, thank you much. No problem. Thanks for the call.

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Hey, Luke and Justin, this is Rob calling from Las Vegas. I was wondering if you could shed some light on how you analyze ETFs. For example, I'm looking at two utilities ETFs, the Invesco S&P 500 Equal Weight Utilities ETF, RSPU, and the First Trust Utilities ETF, FXU. And I'm having a tough time on how to interpret and analyze ETFs. I wanted to see if you could provide some

insight on the metrics that you guys use, not only for these two, but for maybe all ETFs. If you wouldn't mind providing your analysis, I'd love to hear that. I'll be listening on the next podcast. Thank you. Okie doke. Let's dive into this because it can be a complicated question. And so we'll talk about how we would broadly look at it and kind of how that tells us in which direction we'd go here. And so when you're looking at ETFs, the first question is, what is your goal?

What asset class are you looking for? And how does it deliver that asset class? Similar to a company, you also need to know what you own, right? How is it actually delivering it? Is it transparent? And then lastly, what am I paying for it? I'd break it up into those three categories. So clearly what you're looking for is utilities exposure.

So the first one is the RSPU. It's the Invesco S&P 500 Equal Weight Utilities ETF. So we're checking the box there that it is supposed to deliver utilities and their exposure looks like it does, right? Energy utilities being the primary utility that they are exposed to. Now, the second one, also Utilities ETF, First Trust Utilities Alphadex Fund is, again, exposed primarily to these energy utilities.

Now, the next thing is understanding what generally tends to outperform over time. Small caps, mid caps, large cap, small cap premium is what it's called. It tends to be monotonic.

Funds indices that tilt towards smaller names more profitable names those value names tend to do better So what we are looking for with ETFs is are you attacking that asset class in a way that is attacking the drivers of? Expected return over time, right? So we'd look at their market cap exposure looks like FX you pretty underweight large cap relative to the benchmark and you're gonna see the same thing with a

the other fund, RSPU, because it's an equal weight index. What does equal weight do? Well, a lot of indices, S&P 500, the things that people are tracking, the Russell 3000, those are market cap weighted, meaning the size of the company is going to be proportionate to the size of the exposure in the fund. This is equal weight, meaning every name has the same weight. Now, inherently, what that's gonna do is weight towards small caps, and you see that here, although not as much in a pronounced way.

Right, you see large caps is heavily exposed here. Okay, so we know what it's doing, we know what it's attacking. Well, how's it doing it? Equal weight, pretty simple. This is just gonna track a equal weighted index of large cap utility companies. Very straightforward. Well, the other one, FXU, it's quant-based model that picks stocks that are predicted to outperform the broader market.

Seems like a black box to me. So on the box of, do I understand how this is doing this? FXU is a lot more complicated, more of a black box than an equal weight index. It's also more expensive, 64 basis points.

versus about 40 basis points. And so I've had to choose between these. I would always choose the one that I understand, RSPU, Invesco S&P 500 Equal Weight Utilities. And so when you're looking at these ETFs, how much do they cost? Is it actually delivering the asset class that I'm trying to get? And do I even understand how it's doing it? Do they even make it transparent? Thanks for the call.

You are listening to an InvestTalk Best of Caller Questions compilation program. Your comments and questions are always welcome. Call anytime, 888-99-CHART. That's 888-99-CHART.

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This is a special InvestTalk Best of Caller Questions compilation program. Remember, the InvestTalk phone lines never close. Please call with questions. 888-99-CHART.

My question has to do with insuring residential rental properties. And I'm wondering about going with liability only on them. It just seems like the profits are becoming less and less because the taxes are going higher and higher and the insurance rates are going higher and higher on the properties.

So I was trying to figure out if we could cut back on the amount of insurance we have on the rental properties. Some say just have liability only. What's your opinion? Love your show. Thank you. Bye. I think the problem you are having is something a lot of landlords are dealing with. We see that with the fires in L.A. and, you know, just the increased risk of, you know, extortion.

extreme climates. You may see that in Florida, that market is struggling mightily because a lot of people are putting their house on, on the market because either they can't get insurance because of the hurricanes or it's just too high to pay. So this is a challenge. Now the question really is where is it? What is the risk to the actual structure being destroyed in a fire or hurricane or some other, uh,

natural disaster, et cetera. And then your risk, because remember, you're always on the land. And so when you're getting homeowner's insurance, it's not about the value of your home. It's the value of the building. How much does it cost to rebuild that particular structure? And so, again,

That's what you need coverage for. So maybe you have too much coverage. I don't know how much it would cost to actually rebuild the structure of your property, but that's what you have to figure out. And then you have to figure out whether you are willing to take that risk of not having the coverage on the building and just having liability coverage. But there are other risks that you face.

that you can ensure for as well. Loss of use coverage. So loss of rental property if it's being repaired, for example. Okay, so you might want to get that if there's some sort of reason that property can't be rented out. And then there's personal property coverage. If some sort of your equipment on the property gets damaged, you also have

if paying for tenants and medical costs if they're injured on your property so that's medical payment coverage and there are other types of coverages that you can get as well but a lot just depends on what type of risk you're willing to take and then the other question is do you still want to be a landlord i think there's a a lot of people we see this all the time with our current clients hey they're getting older a lot of times the yield you can get in say

The corporate bond market, we're seeing this a lot. People are trading out their rental property with their cap rates at 3%, 4% or so, and they're able to get 6.5%, 7% in the corporate bond market without doing a thing, without lifting a finger.

Where you're not dealing with tenants, you're not dealing with the potential loss of the property due to climate events, you're not dealing with floods or fires or whatever it is that could happen to that property. And so this is a very common problem.

trend that I'm seeing with a lot of the boomer generation. And so don't be afraid to say, maybe I just don't want to be a landlord anymore either. That could be your answer. And if you need help with that, making that decision, don't hesitate to schedule a portfolio review. This is part of, we do portfolio reviews. We look at yes, portfolios, but also really

entire financial reviews, which is, you know, what other assets you own from your personal residence to rental real estate, to pensions, to, you know, planning for social security, doing Roth conversion planning, et cetera. This is all that we do for clients as well. And so don't hesitate to reach out and schedule a portfolio review. Looks like we already have a live call. This one from Tim in San Jose asking a question about Brazil. What's on your mind?

Yes, Luke. Bill, I've been invested in since the Olympics many years, and I kept thinking it's going to be an emerging market, but it has not emerged. It's been kind of dead money, actually. So I'm curious what your thought is in a country that has a great deal of natural resources, particularly oil, but is there a near-term pop to

to for Brazil. I have EWZ and EWZF, which is their large cap stocks and a bucket of their midsize stocks. Okay. And can I ask, what's your exposure level here? What percentage of your total portfolio is this?

Yeah, I'm sorry you asked that. 10 to 20%. That is a lot. All right, let's dive into that. So you are correct in that Brazil is a pretty resource rich country, right? They have a lot of oil. They have a lot of agricultural and minerals. And because of that, they're a pretty big player on the global commodity space.

Another thing they have going for them is they have a pretty large population and it's pretty young. Right. And so that's driven demand for financial services, technology, infrastructure development, kind of against the grain of what we're seeing. And we'll talk about a little bit later in Europe in terms of their population, what that means for their future development. But there's also a downside, right? There's currency volatility. There's.

There's government policy shifts that can impact investment returns. And there's really not a lot of stability there. Right. We had a situation in Brazil where the previous president had tried to overthrow an election and the Supreme Court in Brazil had to step in. And so there's a lot of political dysfunction there.

And it's hard to see positive investment returns in a country that has a lot of political dysfunction. And especially at a time where emerging markets and international markets have been trailing the U.S. markets, right? You have generally seen higher expected returns over longer periods of time from emerging markets because you take on additional risk. And we haven't really seen that. Now, year to date, EWZ is up 12.97%, but on the trailing one year, it's down 15.93%.

And so, what I would say to you is, I don't think there's an issue having emerging markets exposure. I think that when you invest in an emerging markets broad ETF, the one problem is it's highly concentrated in China. And Chinese demand hasn't picked up, and the Chinese market has a lot of risk right now. And so, when you pick individually these countries, I think that may be a better way to go about it.

Now, I don't see any catalysts on the near to midterm that really would expect me to believe that Brazil is going to really pop out and break out here. But I do think if you're considering investing in emerging markets for the long term, I don't see a problem having a smaller allocation to Brazil. I'm talking about 5%, 5% to 10% most. And so...

I think 20 is a lot. I think you probably also know that 20 is a lot. But in the near term, to answer your question, I don't see any catalyst that's really going to make Brazil pop out. Longer term, though, they have a lot of good demographics, younger population, bigger population, and a lot of good minerals. And so if it were me, I would reduce my allocation to Brazil. But I think longer term, it's still a good market to be invested in. Thanks for the call.

You are listening to an InvestTalk Best of Caller Questions compilation program. Your comments and questions are always welcome. Call anytime, 888-99-CHART. That's 888-99-CHART.

You are listening to an InvestTalk Best of Caller Questions compilation program. Your comments and questions are always welcome. Call anytime, 888-99-CHART. That's 888-99-CHART.

Hello, guys. I'm calling about the cannabis industry. Lately, it's been very, very low, going down. Should we think about start buying ETFs, cannabis ETFs? When everybody's thinking about something else, cannabis is maybe a good time or a good investment to start to get into. Thank you.

Sometimes when things are down, things are down for a reason. And certainly with a change in administration, a change in opinion on the cannabis industry broadly, it may be the case that, well, you have changes in enforcement policies, changes in federal policies that can certainly affect a lot of these companies, a lot of which don't operate on strong margins, a lot of which can't really stomach the regulatory scrutiny that comes with a change in administration policy towards what is likely to come over the next four years.

And so with this drawdown, does it make it a good time to buy it? No, I think this drawdown makes a lot of sense. Again, a lot of risks out there. You have to think of things in three levels here. How is the market digesting it? What is going on with the individual company on a micro level? What's going on with the macro economy on a global level? And so the macro factors, the headwinds, I think, are probably against cannabis ETFs. And so even though they look cheap, again, could always get cheaper. Thanks for the call.

Now let's go take a live call. Paul from Palm Desert asking about the Chinese AI news. Are you talking about DeepSeek? That's the one, Justin. Okay. My question is how much of the information that came out today on the whole AI play with DeepSeek and all that, how much of that information can you really trust and how much has been verified? Do you have any feel for that? I don't. I'm

very much a person that does not trust Chinese data and information. Now, that could mean two things. It can mean they're lying about all of it, both from the chip hardware as well as the output, or they could be lying about part of it. Maybe they do have a model that's better than

chat GPT or open AI, but they did it on hardware that has been banned, right? And they found other ways to get around the sanctions. I think that's probably the most likely. That's a pretty big leap to say, not only do we make our software better than yours, but we did it on

on way worse hardware. History tells me that sanctions don't work very well. Nvidia maybe sold it to India and India got those chips back door, sold those chips back door to China. I think that's probably more likely, something like that.

Maybe it was India. It could have been another country or another way that they got those chips in there. Maybe they smuggled them in. Who knows? The point is that the AI names have been priced to perfection. And any little hint that maybe that OpenAI and NVIDIA aren't the leaders, that aren't the ones making all the breakthroughs in the space, starts to re-rate these names lower.

That's the reality here. Is there a world where the innovation is not just on how good these models are, but that how efficient other models are as well? Because if you can do the same thing with less computing power as OpenAI is doing, that's also an improvement. That's also a leg up. There are multiple avenues going forward.

Where these quote unquote winners today are not the winners of tomorrow. Because once again, even if the software doesn't keep up or the efficiency doesn't keep up or both. And so that's really the news here. Whether they're being truthful or not, I think starts to shed some doubt on the space as a whole.

Does that make sense? Yeah, it sure does. I appreciate the insight. Yeah, no problem. Thanks for the call. Let's squeeze in another voice bank question right now. Hi, I am looking for some information on Roth 403Bs versus a Roth IRA. Okay.

I am currently using a Roth 403B through my employer. For reference, I am in my late 20s and I am going to be leaving this job within the next couple of years. Do you think it is better to continue investing into the Roth 403B or to open an outside Roth IRA account? Thank

thank you well it depends on how much you're trying to contribute a roth ira you can contribute up to 7 000 per year and that's your limit you can't go beyond that but if you want to save more on a on a roth 403b or any 403b you can save up to 23 000 per year if you're under the age of 50

7,500 more if you're over 50. She didn't sound like she was over 50. I believe she said she's in her 20s. Oh, in her 20s. Okay. So yeah, so 23,000 is your limit there. So it depends on your contributions that you want to make. Now, the good thing with...

the Roth IRAs flexibility you can invest in kind of whatever you want the 403b you're going to lock be locked into that uh those investment options in the 403b but you said you're going to leave your job probably sometime in the next few years and when you do that you want to roll that Roth 403b into a Roth IRA at that time so look my answer would be depends on his her contribution limits right or contribution you're missing you think you're you're missing one key part here too which is are you getting a match

Yeah. If you're getting a match in your 403B and you instead put it in your IRA, you're walking away from free return there. And so, you know, people ask this all the time is how much should I contribute to my 401k versus my IRA or brokerage account? And I always preach the benefits of having tax diversity here. But you should always be paying

to your 401k such that you get that employer match, right? Otherwise, you're just walking away from free return. Yeah, or 403b in this case. Or 403b in this case. Yeah, so if you get an employer match, I would max that out within your 403b, okay? And then from there, I would go and contribute to your Roth IRA. And if you want to add any more, you want to save more, well, add some more to your Roth 403b. And then when you leave that job...

Combine them. Roll that Roth 403b into your Roth IRA. This is an InvestTalk Best of Caller Questions compilation program. Your comments and questions are always welcome. Call anytime, 888-99-CHART. That's 888-99-CHART. ♪♪♪

This is a special InvestTalk Best of Caller Questions compilation program. Remember, the InvestTalk phone lines never close. Please call with questions. 888-99-CHART.

Now, let's take another live call. And this is Arias from San Diego. And he's talking about cryptocurrency. Yeah, how you doing, Justin? I must say that I didn't know that Steve had passed away. May he rest in peace. Appreciate that. Yeah, I remember talking to him many, many times. As a matter of fact, I remember when Steve first came on the air, I started listening to InvestTalk back in the 90s when Jerry was on the radio.

I love that. I love that you're still listening. That's great. Yeah. Well, I love contact with you guys. I do remember when Steve came on and Jerry told a whole story about how he was a client. And then I liked the way he added a lot to the show. So he's definitely going to be missed. My question about cryptocurrency is this. I'm not invested in it at all. But I know that Warren Buffett never cared that much for crypto. Charlie Munger.

Jack Bogle even never cared that much for cryptocurrency. But what was Steve's, how did he view cryptocurrency?

He was not a big fan of it really either. Now, part of that is anchoring into value investing and things that you can feel and hold in touch versus this kind of nebulous thought of what cryptocurrency could ultimately be, what Bitcoin could be. I understand the ethos of it and where it comes from and the decentralized potential nature of cryptocurrency. But I think those within the industry probably understand

under appreciate the risks and those that are critics, they under appreciate what the industry is trying to do, you know, in many respects has done so far. But I think that the reality is somewhere in the middle. OK, you know, Trump will obviously be good for adoption of the industry, but it also could create more problems than it solves.

Just look at the recent meme coins. I think the Trump coin, I just read this right before the show, fell 30% in a matter of seconds because Trump said that he doesn't know anything about the Trump coin. Basically, it's not really him. He hasn't really commented about it. And so nobody really knew. And so it's not really him. He's not really involved much. And so you see the risk there, instantly down 30%.

And, you know, you have, you know, the I think it was the reverend that did the prayer at the inauguration. He had a meme coin, the Melania coin, all of these things that, you know, really are just not good for the industry.

and makes the industry less credible overall. And that's, I think, the worry is that regulation will become so light touch that it allows the pump and dumpers and the scammers to run amok and make a mockery of what the true crypto enthusiasts are trying to build.

And I think that's a big worry for the next four years. Another side worry is more cyclical. Crypto in general is a proxy for liquidity.

And we think that based on which we'll talk about in a little bit, that the cycle of liquidity is likely to become a lot more challenging in the back half of this year into next year, which could mean cryptocurrency likely peaks sometime in the first half of this year. That's probably what happens. I would say this. I read about crypto. I don't think I would put my money in it because I don't understand it as much, even though I'm learning more about it. But

as far as Donald Trump, he was totally against it in his first term. So now that he's against it, you have to take it with a grain of salt. You know what I'm saying? Because it's popular now. It's popular. So he's thinking about his creating wealth. So I don't really follow what the president is saying. Just

People who understand it, I listen to them. But I think for me, it's just the bread and butter stocks, companies that I can understand and let crypto just become what it's going to become. What we've been doing at KPP is actually finding companies that are going to benefit from the growth in the industry, which is trading and assets moving into that industry. And so you're not betting on one company.

particular coin or whatever. It's just saying there's more interest, there's more money flowing there, et cetera, and companies that make transaction fees, et cetera. And that's, I think, a better way to invest in crypto than trying to guess what

right, which is the next coin that's going to pop or whatever. Now, you could do that if you want to get deep in the woods and take that risk. But, you know, it is it is a very, very challenging and dangerous game to play. But it's right for some, but wrong for most. Let's just say that. But thanks for the call. Thanks you for the kind words about my grandfather as well as Steve. And cryptocurrency will have an interesting four years. And I think

especially over the next 12 months. Now we've got plenty of time, so let's head back to the InvestTalk YouTube comment section question bank. Tackle this one on inflationary fiscal policy. It says, even though inflationary fiscal policy is slowing down the rate cuts, we could still get tax cuts for small caps by Q4 and likely some sort of rate anticipatory debt restructuring on their balance sheets going into 26.

Wouldn't the market anticipate this and give us a significant holiday run in 2025, assuming this is the scenario? Well, here's the thing. The macro picture is complicated. It's incredibly complicated. If you look back to Trump's first term, tariffs didn't have that much of an effect on...

hurting the economy. The reason why is because the order of operations, right? You had tax cuts, deregulation, then tariffs. This time around, you get inflationary fiscal policy, potentially tariffs, then down the road tax cuts, right? We don't know the degree to which there will be tax cuts. Certainly the tax cuts will at least be extended, but the market can only anticipate probability of scenarios, right? And so if the market is pricing in pretty robust tax cuts now,

Well, then the market is already reflecting those tax cuts now, and any surprise on the positive or negative side between what can get done is more likely to change prevailing market direction. And as you get closer to those events, well, it becomes a more input on the overall sentiment. But what we're seeing now is the other side of the order of operations, the things that can be done more quickly, the tariffs, trade policy. And so that's really been a key focus of not just us, but market participants,

in this year. But the general thing I want to say, because I need to emphasize this, the market has trillions of dollars of money moving with people taking sides of trades in milliseconds and digesting a bunch of information. It's not as easy as boiling down to one thing driving price action. And so to answer your question,

is should tax cuts float the market heading into 2026? 2026 is a long time away. A lot can change. And I'm sure there will be a lot of things that change in 2025. Thanks for watching. Let's take another live call. David from Fremont. And he has questions about profits. Also, once again, listening on KDOW AM 1220.

Yeah, hi. Thanks for taking the call. I listen to you guys. I really appreciate what you're doing. My question is, I found an offer from a brokerage where they guarantee you 6.9% locked in

with no possibility of losing your money. So my question is, can they guarantee that kind of money because they get special pricing? What did you say they're buying? Or are they owning stocks, bonds, what? They said it's a basket full of...

different corporate bonds. Yeah. So what they're doing, yeah. So what they're, what they're doing is, uh, I'm not sure what the, what the package here is. You'd have to give me a little more details, maybe off air. If you want to go to our website and submit something, we can kind of talk about it in more detail, but, uh, all they're investing in is, is high yield bonds and you can get high yield bonds yielding, you know, high sixes right now. Uh,

pretty easily. So odds are good that it's not guaranteed, although maybe you're locking in the yield, but the safety of that money is probably not as guaranteed as you might hope. So I really have to look at this. So send me over any details that you have, and I can kind of look at it and give you the pros and cons. Thanks for the call.

Hi, Justin and Luke. This is James from New York. I have a general question. 20-year treasuries hit about 5% recently. And I'm wondering, if you're in your early 30s, would you allocate some of your portfolio, say 5% to 10% to long-term treasuries? Or should I just continue to put into indexes and into equities? Just wondering, is it worthwhile? Do you still have 30 years, 40 years to invest? If it's worth it to buy these long-term treasuries at 5%. Thank you. So this is a good question.

You know, the old rule is 120 minus your age is what you want in equities. Now, that is just a rule of thumb. It's not something that you need to have set in stone. It also only considers you having a fixed income and equity ratio.

allocation. But what that means is, if you think about it, is the general principle tells you when you're younger, because your time horizon is longer, because you're not going to need the money anytime soon, hopefully, you can take on the additional risk to build capital. The primary purpose of having a high equity allocation is to build your capital. And so by having your equity allocation be 120 minus your age,

That means that as you get older, you have less and less in equities and more and more in fixed income. Because as you get older, you're more concerned about using that capital, preserving that capital. Now your question is about a 10% allocation to, let's just say, long-term treasuries. Now this rule tells you, well, 120 minus 30,

90% in equities and therefore 10% in fixed income is perfectly reasonable. But I will say you're going a little long on duration. Long-term treasuries tend to underperform inflation over longer periods of time. And if you think we're moving into a higher inflationary environment and you think yields are going to be pressing upwards, well, then you're locking into potentially lower yields, at least from a historical perspective, for a longer period of time. You could see some losses there.

We're also in an environment where you can get some pretty good yields on corporate bonds with relatively low risk. And so I would say it's perfectly reasonable if you want to have an allocation of 10% to fixed income. I think that's fine. I don't think it's necessary, but I think that's fine.

But what I wouldn't do is take that and reach to the far end of the yield curve and lock it into something that exposes you to a lot of duration risk and puts you at a disadvantage in an inflationary environment. Thanks for the call. Bill from Virginia here. I got a tax question. So say that I buy a stock, put $10,000 in it, and eventually it goes to $20,000. If I pull that initial tax,

INVESTMENT OF $10,000 OUT AND SELL

Is that taxable, even though I'm pulling the original amount that I invested in and there's essentially no capital gains? Just a little confused in that aspect of things. I'm looking forward to hearing your answers. Thanks so much. Stocks and taxes. I truly wish what you just said was the case, but unfortunately it is not. And that is because capital gains are measured at a lot level. What is a lot?

Well, when you go out and you buy 200 shares of something, or rather you own 200 shares of something, maybe you bought a hundred of them a week ago. You bought a hundred of them today. The first hundred, you bought it $98. That's one lot, one lot with a acquisition cost of $98. And the second one, you bought it a hundred dollars. That's the second lot.

And so when you go to sell shares, your taxes due are based upon the difference between the sell price and the acquisition cost. So even though you put in $10,000 and now you put $10,000 back into your checking account, well, in your example, the stock doubled.

And so you still sold half the shares. So what did you buy half the shares for? What did you sell them for? That's how you assess your capital gains that are due. Again, I wish it wasn't the case, but the tax man, tax man always wins.

Thanks for the call. Tim in San Jose asking a question about Brazil. What's on your mind? Yes, Luke. Brazil I've been invested in since the Olympics many years ago. And I kept thinking it's going to be an emerging market, but it has not emerged. It's been kind of dead money, actually.

So I'm curious what your thought is in a country that has a great deal of natural resources, particularly oil, but is there a near-term pop to

for Brazil. I have EWZ and EWZF, which is their large cap stocks and a bucket of their mid-sized stocks. Okay. And can I ask, what's your exposure level here? What percentage of your total portfolio is this? Yeah. I'm sorry you asked that. It

10 to 20%. That is a lot. All right, let's dive into that. So you are correct in that Brazil is a pretty resource rich country, right? They have a lot of oil. They have a lot of agricultural and minerals. And because of that, they're a pretty big player on the global commodity space.

Another thing they have going for them is they have a pretty large population and it's pretty young. Right. And so that's driven demand for financial services, technology, infrastructure development, kind of against the grain of what we're seeing. And we'll talk about a little bit later in Europe in terms of their population, what that means for their future development. But there's also a downside, right? There's currency volatility. There's.

There's government policy shifts that can impact investment returns. And there's really not a lot of stability there. Right. We had a situation in Brazil where the previous president had tried to overthrow an election and the Supreme Court in Brazil had to step in. And so there's a lot of political dysfunction there.

And it's hard to see positive investment returns in a country that has a lot of political dysfunction. And especially at a time where emerging markets and international markets have been trailing the U.S. markets, right? You have generally seen higher expected returns over longer periods of time from emerging markets because you take on additional risk. And we haven't really seen that. Now, year to date, EWZ is up 12.97%, but on the trailing one year, it's down 15.93%.

And so what I would say to you is I don't think there's an issue having emerging markets exposure. I think that when you invest in an emerging markets broad ETF, the one problem is it's highly concentrated in China. And Chinese demand hasn't picked up. And the Chinese market has a lot of risk right now. And so when you pick individually these countries, I think that may be a better way to go about it.

Now, I don't see any catalysts on the near to midterm that really would expect me to believe that Brazil is going to really pop out and break out here. But I do think if you're considering investing in emerging markets for the long term, I don't see a problem having a smaller allocation to Brazil. I'm talking about 5%, 5% to 10% most. And so...

I think 20 is a lot. I think you probably also know that 20 is a lot. But in the near term, to answer your question, I don't see any catalyst that's really going to make Brazil pop out. Longer term, though, they have a lot of good demographics, younger population, bigger population, and a lot of good minerals. And so if it were me, I would reduce my allocation to Brazil. But I think longer term, it's still a good market to be invested in. Thanks for the call.

You are listening to an InvestTalk Best of Caller Questions compilation program. Your comments and questions are always welcome. Call anytime, 888-99-CHART. That's 888-99-CHART.

This is an InvestTalk Best of Caller Questions compilation program. Your comments and questions are always welcome. Call anytime, 888-99-CHART. That's 888-99-CHART.

Hello, InvestTalk. I was calling in with a question regarding tips and was wondering would this be a good time to get into this as a hedge against inflation? So I wanted to get your thoughts on that, and I will be listening to your podcast. Thank you.

Yeah, it is. I think it is a good time to get into treasury inflation protected securities. If that's, you know, now there are different ways to get hedges against inflation. Now, tips are one of them. You can just go by TIP, which is the iShares website.

tips Bond ETF or STIP that's probably my favorite that's the short term kind of zero to five years so you don't have the duration risk there so that that's that's the way I would go if you're trying to pick up tips and have that part of a broad portfolio it's a I I think of it as the bond slice that hedges you against inflation because typically bonds are terrible hedged against inflation unless you have something like tips

And so if you have bonds in your portfolio, you have a relatively low risk tolerance, but you still want hedge against inflation. Tips are great. Now, are they the best hedge against inflation? No. I mean, equities do better. If inflation goes up, then you will get with tips, but it's riskier. Right. And, you know, there's more downside if you go into a deflationary environment. Right. Equities tend to fall.

And so it's a more volatile bet on inflation, whereas TIPS, you don't have the downside when you hit some sort of recession or deflationary bust, but you still get that inflation hedge during those inflationary times.

Thanks for the call. Let's touch on another question submitted via our YouTube channel. Nicholas Collins says, I have a question about gold. However, gold can be described as a hedge against inflation, less volatile with less risk, and a great way to diversify. It seems that over the years, gold has outperformed the S&P 500. I was always told that on average, stocks will have higher gains over the long term, but will be more volatile. That doesn't seem to be the case.

Is there something I'm missing? Also, if I were to add gold to my portfolio, would this be a good time to buy and what type would be best? Gold miners, solid gold, etc.?

This is a great question. It depends on what time frame you're talking about. If you talk about 2000 till today, gold has outperformed stocks. But you're kind of cherry picking the top in markets, you know, the top in March of 2000. So you're picking a bad time to buy equities. And gold at that time is very, very low. And so it's done much better than equities.

equities since 2000. But if you just set that date back to like 95 or even go back to the secular bottom in equities in the early 80s, equities have outperformed gold. So it kind of depends on your time frame. Now, you're correct. It is a good inflation hedge, the portfolio diversifier. That's certainly true. But there are some nice tailwinds right now, and it's really geopolitically. You've seen with us confiscating the assets of Russia. We obviously have, we're kind of in this fourth turning type of environment where we're

Things are changing. You obviously have wars in the Middle East still and Eastern Europe. And all this means that there's a flight to safety. There's a lot of buying coming out of China as the housing market there is becoming more and more uninvestable. And there's just a lot of nice tailwinds to the gold price. So.

I would use it once again as a portfolio diversifier. You should have good exposure there. Now, is this the perfect time? No, I mean, the market's rallied. You'd rather have a little bit sentiment to be a little bit more negative, but I wouldn't get too choosy, especially if you don't have much gold allocation. I could see gold going from here at 2,900 ounce all the way up to 3,500. And then you have a 15, 20% pullback in gold and you're just back to kind of where you are now or maybe a little higher in the next down move.

So it kind of depends on where gold peaks out in this current cycle. Right now, it's in a bull cycle. So I would be buying on dips. And now, which type is the best? Well, the question is, how much risk do you want to take? Gold miners are historically riskier. But if we do get a boom in gold prices, their earnings are going to go up dramatically. There's what are called operating leverage with gold miners.

and so that's why we tend to like those a lot of them pay dividends as well but you have to find ones that have good quality minds good jurisdictions good leadership etc and that can be more of a challenge now you could buy like a broad-based etf like this one that one caller is asking about industrials that could be a good way of going about it as well if you don't want to investigate individual names go do that physical gold i don't mind it i just think it's

little bit of overkill. I don't think that the financial system is going to collapse. If the financial system collapses and you can't get your gold from your GLD or whatever, I don't think that you have to give other problems to worry about. I don't think you're going to get into that type of situation. Having a little bit of physical gold, fine. I have no problem with it, but I don't think that is necessarily the way you should be gaining that exposure to gold.

You could buy GLD or IU, one of those gold ETFs that follow the price of gold. That would be a little bit lower risk than buying gold miners, but just kind of depends on your risk tolerance level. And here's another cute example or cute idea. Buy a little of each. Diversify. Diversify your diversifier. Thanks for the question.

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