Amy: Tonight, do you feel like you need some Dramamine? We're talking about the wild the daily swings on Wall Street and what the massive merger between Kroger and Albertsons could mean for you. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. Steve, we usually don't talk about any individual days in the stock market, because as investors, we know that any given one day isn't worth focusing on.

Steve: Yeah, yeah.

Amy: Yet, last Thursday, when the new inflation numbers came out, markets went way down. Okay. Expected that, and then came way back up.

Steve: Yeah. I mean, we got the inflation numbers Thursday morning, you know, I get up, the first thing I want to check when I turn on my computer. Okay, the inflation numbers, they weren't what I was hoping for, not as bad as maybe they could have been, but they weren't good. They weren't good. And so, as expected, the market opened up on Thursday, down 400, I think at one point down 500. And then, boom, you know, the market takes off and ends the day up about 900. It literally was about a 1300, 1400-point swing during the course of the day. So, you know, okay. What are the smart people out there saying caused it? Nothing. Crickets. I mean, nothing.

Amy: I was going from like site to site saying, "Okay, what are they saying?" Right? Because usually, you and I can say, "Well, this is obviously what people are responding to," yet, there was nothing obvious about what was going on. In every site, it seemed to say, like, "We're throwing up our hands, we're not sure," or a different explanation. And really, none of it made sense to me.

Steve: None of it made sense to anybody. And then, you know, you could study this to the nth degree and say, okay, usually the largest amount of volatility is at a market bottom. Hang on a second. But you know, we're seeing these 1200, 1300, 1400 point swings, you know, big down day on Friday, crazy volatility today, you know, it's just these 400 and 500 and 600 points swings that happen. Nobody, you know, can say, "Oh, it's because this came out, or that news happened." And you wonder... I don't wonder anymore. You know, why people say it feels like it's just gambling, you know, how can you say this makes sense when you see crazy swings like this? I mean, I want to talk about that a little bit. And believe it or not, it does make sense, but you hit the nail on the head, Amy, you shouldn't be focused on one-day swings because most of it is run by computers and algorithms written for short-term trading. And that's not what we're investing for.

Amy: And I think that's the thing, right, as a human investor, someone who's hopefully a long-term investor, you're not programmed, obviously, the same way these computers that are making massive trades actually move the markets more. So when you are kind of putting human emotion onto what's moving the markets, in some case, it's not human emotion that's moving them at all, right? There's just certain points that trigger certain responses from these computers.

Steve: Tell you a quick story. And this is about a two-year-old story, but I'm over a friend's house, and his son-in-law, really nice guy. We get to talking about what we do for a living, and he's the guy that writes the algorithms. He works out of Chicago real smart guy.

Amy: He's that guy.

Steve: Real smart guy, okay, Ph.D. in math. Not investing, in math. Okay? And so...

Amy: I think that makes sense.

Steve: Yeah. And I'm obviously picking his brain. So, "Okay, how much stock trading experience do you have?" "Oh, none." "Okay, but you got your PhD... in math, so you understand. How do you write the algorithms? What are you looking..." Well, you know, we look at this index, we look at that, we look at history, we do this, we do that. And really what it's boiling down to is they're taking advantage of really, really... When I say short term, I don't mean like a couple of months, I'm talking a couple of seconds. Okay? they're taking just massive advantage of these really quick changes in the stock market So they can lock in these tiny gains. But over, you know, large amounts of money, it adds up to a lot of money. And it has nothing to do with you, or me, or anybody else putting their money in a 401(k) hoping that we can afford to retire at a certain age. Now, the saving grace of all this is in the long run, what you and I do does add up, it does make sense, there is value in growth in stocks. But in the short term, what happened today, what happened yesterday, what caused it, it's tough to make sense when it's literally a computer doing the buying and selling.

Amy: Here's a little historical perspective if you were looking at last Thursday and saying, "What the heck?" Right? There's actually only been nine other days in the past 40 years when the S&P 500 went down more than 2% at one point of the day and that finished up over 2%. It's not the norm, right? Yes, we have seen volatility recently in the markets and up days and down days and weeks and down weeks, but days like Thursday are incredibly rare.

Steve: They really are. And there is news out there driving stocks. I mean, right now, the world is super focused on inflation. Is it under control? And, you know, okay, I think we'll start to see it get under control, but it's not there yet. So until we get a good long trend on inflation getting under control and dropping down to reasonable numbers, I think we're gonna continue to see some pretty wild fluctuations.

Amy: You know, every piece of economic data that we usually get, and, you know, sometimes we talk about it on the show, sometimes we don't, but. you know, it puts together each piece of the puzzle that kind of talks about the overall strength of the economy right now. Well, at this point, things are a bit different because every piece of economic data that comes out, we're looking at it through the prism of how does this affect what the Fed is going to do next?

Steve: Exactly.

Amy: Right? It holds an immense amount of importance that it doesn't usually. Usually, it's just one very small piece of a very large picture, a very large puzzle. But as each piece comes out now, we're looking at it and we're saying, "Okay, what does this mean for the Fed? Tomorrow, what does this mean for the Fed? What are these bank earnings mean? What does this, you know, inflation mean? What do these job numbers mean?" And I think that is what's contributing to these, you know, wild market swings that really, I get it, you kind of feel like you do need Dramamine. You're listening to "Simply Money" tonight here on 55KRC as we try to make sense of what's going on in the markets. And just a reminder, right? If you're smart, long-term investor, days like today, or last Thursday, or pick any given day, don't matter. And, Steve, you've always said, "Look back five years ago, right, how much was going on in the markets really matter?" You know, in the moment, it holds a lot of weight, but five years later, it's still the money in your 401(k). It's up or it's down.

Steve: It is. And that's everything. Okay, these crazy one-day intraday swings, it really doesn't matter. That's not my world. Even though I do this for a living and have for 40 years, that's not my world, and it shouldn't be anybody's world out there, to be honest with you. But we do have to pay attention to, "All right, what's the future of the U.S. economy?" And there's a lot of negative sentiment out there, but, you know, we will get inflation under control. I'll tell you what, I'll give you an example. Mark Twain had a great quote, he said, "There's lies, there's damn lies, and there's statistics." And that's his way of saying, "You can tweak these numbers any way you want to your advantage." I read a really interesting op-ed piece in MarketWatch, which is good publication, and it was written by one of their columnist. And his argument was, we look at... When the September inflation numbers came out last week, we look at, okay, what was the inflation for the month of September as compared to September of a year ago? And his argument was, we really should be looking at it month-to-month, I mean, short term, you know, what's the short-term trend of inflation? Are we getting a handle on it? And he said, but the month-to-month, it's too noisy. There's too much up and down. So he said, "Okay, how about a quarter-to-quarter?" Let's take a hard look at what the June, July, and August quarter was compared to the previous quarter. And his numbers came up with, it was only 2% higher.

So, in other words, he said quarter-to-quarter inflation was only 2%. That's what the Fed wants. Isn't that good news? And I'm scratching my head reading this, saying, "He makes a good point. Maybe this isn't a big deal. "Wait a minute, wait a minute, you know, you go grocery shopping, you go to the gas pump. No. You know, inflation is high. But I kind of like the point that he made of all right, maybe we're starting to see a short-term trend of reducing inflation. We'll see what the next quarter looks like and the quarter after that. But, you know, I'm ready to reach for any positive news I can get right now to get this market off the bottom and get your and my 401(k) moving back in the upward direction.

Amy: Well, and I read that article too, and what I think, you know, his point also is looking back a year really doesn't tell us where we're going forward, right, what's gonna happen next when it comes to inflation. And, of course, that's what everyone's wondering because, you know, future inflation numbers also affect future Fed rate hikes, right? How much longer are the Fed gonna be this aggressive? You know, so being able to look at quarterly trends, give maybe a better prediction of what we can expect moving forward, and I think that's kind of really interesting way to look at it. We'll have to see, you know, whether maybe that way of looking at inflation can hold water moving forward. Who knows? But, man, for now, every eye, every day when this new data comes out, definitely on, you know, the markets and on Main Street, what does this mean? What does it mean for the Fed? Let's talk about retail sales because that's 70% of the U.S. economy. And, you know, there was some decline last month in gasoline sales and things like that. But excluding those categories, retail sales actually rose a little bit in September, once again, kind of pointing to, is this working?

Steve: Well, and, you know, we're in that environment, we've talked about this, where bad news is good news. We need to see the economy slowing down so that the Fed can quit raising interest rates as quickly and as much as they have. Their next meeting is in November, and odds are, they're gonna raise another three-quarters of a percent, as in, like, 99% likelihood, you know, so they keep doing this. But, you know, when you take a look at how much they've raised interest rates, yeah, it's gonna have an impact. If you're spending 110 bucks to fill up your gas tank instead of 60 bucks, that's less money you've got for other stuff, you know? I can get real technical here. But you know that.

Amy: That's called common sense. Yes.

Steve: Yeah, it is.

Amy: So technical.

Steve: We're gonna see consumers start to slow down. And anecdotally, I'm hearing people saying, "Yeah, okay, not gonna go as crazy this year," you know, and that sort of thing. And we've already seen it in real estate, Amy. I mean, what's the 30-year mortgage rate now? It's over 7%.

Amy: It's more than doubled since the beginning of this year.

Steve: Yeah. December of last year was about three and a quarter percent on a 30-year mortgage on a median price of a home, which I think is around 328,000, 330,000 bucks nationwide. That's $1,000 more a month for a mortgage payment. That's real.

Amy: Right. Can you swing that? I mean, for a lot of people, that's a game changer. A thousand dollars more, I don't think I can make that work. And, to your point, yes, that's slowing down the housing market, you know? And that's exactly something that the Fed would expect and want to see happening as the result of their actions.

Steve: Yeah. So you've got that going on in real estate. So, you know, people are either buying houses and have $1,000 a month less to spend, or they're saying, "I'll wait around a little bit longer." Meanwhile, the landlord's raising rates because that house appreciated so much in the last year, so they're gonna raise rents. And we're also seeing it in the corporate sector because if you're a manufacturer, your cost of goods, you know, what you're buying to make whatever it is you're making, that cost is up, labor costs are up. And, by the way, if you're borrowing money, which every corporation does to some degree, it seems, your cost of borrowing is more, you got to either raise prices, cut back, you know, let some people go, something's got to give here. And so you're seeing... We're just beginning to see a slowdown in the corporate world, which, again, bad news is good news, this will hopefully allow the Fed to reduce the pace of increasing interest rates, and that should bring inflation down as we see the rate increases that they've already made really start to bite and take hold.

Amy: Here's the Allworth advice. Don't think you have to do something right when the market is all over the place and we see these wild swings like we have over the past week. In fact, the best thing to do is the opposite of that. Stay calm when the waters are choppy. Huge local story we're following right now, a win for the hometown team. That's right, Kroger buying another grocery empire for $25 billion. What that means for you, next. You're listening to "Simply Money" here on 55KRC, THE Talk Station.

You're listening to "Simply Money." I'm Amy Wagner along with Steve Sprovach. If you can't listen to our show every night, get our daily podcast. You listen to this maybe the following morning on your way into work, or at the gym, when you're getting your kids ready. If you think your friends could use some financial advice as well, well, send them to us as well. You just search "Simply Money" on the iHeart app or wherever you find your podcast. Coming up at 6:43, how to decide whether your 401(k) is too conservative, too aggressive, or maybe just right. Huge story in the news. Started last week, continuing this week. We'll see how this all plays out. Since today's largest company by sales could get even bigger, Kroger agreed to buy grocery giant, Albertsons, for, you know, cool $26 billion.

Steve: That's a lot of money.

Amy: It is a lot of money and a very big deal.

Steve: Well, it is a big deal. And I'll tell you what threw me. If you asked me who the top three grocery retailers were, I'd probably say Kroger, Safeway, and I don't know, maybe somebody else. The top three are actually Walmart, Amazon. Amazon blew me away. I mean, they're second-largest in the country, but they bought Whole Foods, you know, and Costco, these are major grocery chains. Kroger was fourth. Okay? But Albertsons, which, again, tells you how little I know own, Safeway. I thought they were separate. This is gonna make them a big, big player. And you know, it's subject to FTC approval, which I don't know if this is gonna be a gimmy, we'll see how that shakes out. But if the deal closes, it'll close early in 2024. And it's gonna be a huge, huge combined entity once they put everything together.

Amy: Yeah. Albertsons, not a huge name around here, of course, Kroger is the name, but they have stores in New England, and New York, Pennsylvania, all along the Northern Atlantic Seaboard where Kroger doesn't have a presence, right? So now I was looking, it's like Kroger has a presence assuming this deal goes through. And you're right. There's people kind of on both sides of it who would say, "This could be a major issue as far as a monopoly" and others just saying, "I think it'll be fine

Steve: Yeah, but if they let Amazon buy into Whole Foods, how could they argue this one? That's the way I look at it.

Amy: Well, you know, the interesting thing about that is I was on the air when Amazon bought Whole Foods. And I remember we were all stunned, really, on the day that... Because, you know, we're all here in Cincinnati pulling for Kroger. And we were like, "What does this mean? What does this mean for Kroger?" Because when Amazon goes into any sector, it doesn't matter what it is they completely take over. They're like Godzilla. And what does this mean to Kroger, what does this mean to the hometown team. and I gotta give Kroger all the credit in the world. Man, they have been smart. You know, if you know anything about grocery stores, margins are razor thin.

Steve: Oh, they make next to nothing.

Amy: Make next to nothing on each individual product as it's going down. They're not making 50 cents every time you buy Oreos, that's not how it works. So razor-thin margins, yet they have been so smart about online delivery and then things like that, and really just opening up the ability for them to expand and expand, and they have hung in there. This is like a shot at the bow of Amazon, right? Like, "Hey, we're not going anywhere." And I also read last week where Rodney McMullen, the CEO of Kroger, still has the Cincinnati business courier on his desk from the day that that story broke. And I can't remember what the headline was, but it was kind of asking like what does this mean for Kroger, and he's like, "It's a reminder that, you know, there are some days that are big losses, and we've still continued to fight through all of that." And I think this could be a huge win for Kroger.

Steve: It's gonna be a huge win. And they're obviously, they've got to be a well-run company to have survived the pandemic and, you know, ClickList and all the, you know, things that they did to continue to just grow and thrive. And I read a quote by the CEO of Albertsons about this, his name is Vivek Sankaran, and he said, "We've been on..." This is Albertsons CEO, "We've been on a transformational journey to transform Albertsons into a modern and efficient on-the-channel, food and drug retailer." He's gonna be out of work after this deal goes through. I'm thinking, "You know what, obviously, not simply money terms, I think he's gonna just write mission statements that sound really cool and say absolutely nothing."

Amy: Lots of CEOs could hire this guy to do your mission statement, put it on your website, and beyond that.

Steve: Tell me what means. Well, you're out of a job, you're getting bought out. So good luck.

Amy: So Kroger says, okay, listen, like obviously, what does this mean to you? Right? That's what everyone cares about. Well, they say that's gonna lower your prices, prices for customers, they're going to reinvest about $500 million of cost savings. They also use the word synergies to reduce prices for customers. This means, to me, where there redundancies, but also where are the people working for Albertsons that they also have working for Kroger, and where can they make cuts? And at first I was like, "Oh, that might not be so great for Kroger corporate," but most of the time, the company doing the acquiring keeps most of the positions and the company that's being acquired is probably the people in the upper echelons, they're the ones who need to be nervous tonight

Steve: You're getting cynical in your old age. But, no, there's some truth to that, but, you know, they're gonna be gargantuan. I mean, combined 710,000 employees, assuming the deal goes through, 5000 stores, $210 billion dollars revenues, $3.3 billion net earnings. These are big numbers, and yeah, I'm sure there's gonna be lots of savings. And hopefully, it just boils down to, "Hey, I just don't want to pay $14 a pound for my roast beef anymore." You know, that's inflation hitting home.

Amy: That roast beef has really upset you.

Steve: It is. It is.

Amy: I get it. I get it. Here's the Allworth advice. Kroger says if this deal goes through, you can expect lower prices. We'll have to wait and see. Here's a question for you. Grandparents, should you leave money for the grandkids in your will or your trust, how much? Should you be talking about this with your family? A deep dive into this next. You're listening to "Simply Money" here on 55KRC THE Talk Station. You're listening to "Simply Money." I'm Amy Wagner along with Steve Sprovach. I've always had close relationships with my grandparents. I know for so many people, your grandchildren, you're so close to. And I think the key for many is when you start to think through that estate planning process, do you leave money only to your children, or do you include your grandchildren as well? Joining us tonight with his insights is Mark Reckman. Of course, he's our estate planning expert in the law firm of Wood and Lamping. How often does this happen, and what do we need to think through Mark?

Mark: Well, I would suggest it probably happens, about 10% of my clientele will say to me, "We'd like to leave money to our grandchildren."

Amy: I would've thought it would be more than that. But I guess they think it will trickle down.

Mark: They do. And, yes, I am surprised that it's so low, but it does. It does come up about 10% of the time, and not much more than that. And of course, you can do that you can definitely leave money to your grandchildren. But then the question is, should you do that? And if so, how much?

Amy: Well, and think about this, okay, you love your grandchildren, but they're under the age of 18. And you're not even sure how they're gonna be as an adult. Yeah. Right? And, you know, you leave all this money to a 12-year-old, who knows what could happen? So how do you think through that?

Mark: Well, I think you start by deciding what your purpose is. Are you trying to leave them some money so that they will remember you? What I mean by that is money that is fun money that you intend for them to spend right away. And if that's the case, then keep the gift small, $1000, $5000, something under $10,000. Give it to them outright, unless, of course, they're minors, under 18. And then don't worry about what happens to it. Because it's just fun money and it's just a way of saying, "I acknowledge you and I love you, and here's some money, take a vacation." But if you're trying to give your grandchild a leg up in life, a start, then the gift needs to be large enough to actually be helpful. And in those circumstances, I would suggest that you put it in a trust unless your grandchildren are very stable or older.

Amy: All right. What if it is a significant sum, and you've got a young grandchild?

Mark: In that particular case, I would put that money into a trust. And I would be a little cautious about that, Amy, for the very reason you mentioned a minute ago. I have seen many cases in my career, and, in fact, outside of my career where people, young people seem to be in good shape, but then enter into mental health crisis's in their young adulthood. I can remember one of my neighbors growing up here in Cincinnati who was an Eagle Scout and he went to high school with me and he was the President of Student Council and the captain of the swimming team. Very popular, strapping, healthy young man, got a full scholarship right to go to an Ivy League college on the East Coast. And he went up there, and he fell apart. By Easter of his freshman year, he had joined a religious cult, he had given all of his money, that he had access to...college money that was being saved because he was on a scholarship. But he got access to that money, and he gave it to the leader of the cult. Within the next year, he was gone off to Mexico and was missing from the family for a good five years. Finally ended up back in Cincinnati and never really got back on top of things and he was dead by the time he was 30.

When I was in high school, I was on the debate team. I was the captain of the debate team with another man, co-captains. A charming young man, lived in Hyde Park. And he headed off to college in Michigan. And I remember seeing him at Christmas time. And he was a mess, Amy. And he had this experience where he was in a chemistry lab taking chemistry in college. And he was in the lab and they were working on the tables with Bunsen burners. And he said that he turned his head at the table behind him, the entire table had caught on fire. And that he rushed to the fire alarm, he grabbed the fire extinguisher, he yelled to evacuate, and he started spraying the whole room. Amy, it wasn't real. The whole thing was on hallucination. The poor guy had completely fallen apart. And by the time he was 30 years old, he'd taken his life. And this was a guy who at the age of 18 looked perfectly normal with the greatest promise of anyone. And so I always caution my clients, be careful about leaving money to your grandchildren because even if you think they're great, and grandparents do, you just don't know. There's so much that can happen, and it seems to be especially true for boys.

Amy: How do you then protect it? You know, even if it seems like that child is on the right track, right, and maybe they're 18 years old, but they haven't gone away to college yet, right? There's so much left of life to be lived and so many things that could go wrong, how do you say, "Okay, I want to leave this money to them, but I also want to make sure that it's not squandered or they turn out okay?" How do you protect that?

Mark: Well, this is where a living trust can become quite useful. So that if you have a significant amount of money...and I'm not talking about $5000 or $10,000, I'm talking about a significant amount of money, like $100,000 or more, it is wise to put that money in a trust so that it can be managed by a trustee until your grandchildren get old enough that you're comfortable that they will be stable. And that might be 25. Frankly, I think it's more like 30 years old, but that's a personal choice that each person makes needs to make individually.

Amy: What do you do if you want to leave money to your grandkids but your children are still like at the age where they could have more children? So what if you passed away and two or three more grandchildren are born? Well, they didn't know you, you didn't know them, but they're still your grandchildren. Would you want to take care of them as well?

Mark: This is one of the risks of including grandchildren or great-grandchildren in your estate plan, and is one of the reasons why it's not always a good idea. I remember specifically, this has probably been about 10 years ago, my mother had a great-grandchild. And she came to me and she said, "I want to put some money aside for this great-grandchild's education." And I stalled her. And sure enough, we had another great-grandchild. And she came to me with the same request. And I discouraged her from doing it because of the very reason you just mentioned. Now, my mother passed away. And she had five great-grandchildren who were born after she died. So if she had started putting money aside for great-grandchildren's college as each one was born, she would have missed most of her great-grandchildren because the majority of them were born after she died. And so this is another reason why you're better off leaving money...in many cases, you are better off leaving money directly to your children and letting them administer and make these kinds of decisions down the road so that nobody gets left out. Now, this is a personal choice. I'm just suggesting that this is what I've seen play out in my practice.

Amy: Well, there's a lot to think through, right? Great insights, as always, from Mark Reckman, our estate planning law expert from the law firm of Wood and Lamping. If you're thinking through leaving money to grandchildren, there's a lot to think through there. You're listening to "Simply Money" here on 55KRC THE Talk Station.

You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. Do you have a financial question you'd like for us to talk about on the show? We've got a way for you to handle this. There's a red button you can click on while you're listening to the show. You go on the iHeart app, you're listening to the show, you click on the red button, you record your question, and it goes straight to us. And, yes, we will talk about it. Straight ahead, some advice for those who want the best seats for sporting events, even though you might blow your budget buying them, what you need to think about. You know, I would say there's a question that we should get more often, but we don't get it as often as we wish that we did, and it has to do with your 401(k). I think so many people, Steve, just like fill it out and don't think about it again when you need to be looking at it and saying, "Hey, is this allocated right? Is it too aggressive? Is it conservative? Is this just right for us?"

Steve: I love asking that question when somebody comes in to see me, "You know, tell me about your 401(k), do you have a statement? How's it allocated?" And every once in a while, I'll see somebody just nod just aggressively say... You know, you can almost hear them say, "Oh, I got this. Yes, yes, I now have it. I'm in mostly mutual funds." Come on. You don't even know what the breakdown is between stocks and bonds. And this is generally the largest chunk of your net worth next to your house. So you have to know about it.

Amy: Oh, my gosh. Yes, and for everyone, it's the largest. The largest vehicle you have for saving for retirement pensions are gone. It's on you. It's on your 401(k) most of the time. So, hey, guys, like you should be paying attention to this. Yet, most people don't know the answer. And most people, when they come in and talk to us at Allworth, don't say, "Hey, can you look at..." We have to ask, "Hey, can you look at your 401(k) Right? This is kind of one major piece of your overall portfolio, your overall plan, and it's incredibly important." So, yeah, the question is, what is it invested in? If you are someone who when you look at what that 401(k) is invested in, and it's in bonds, it's in CDs, that's pretty conservative. And I think the problem for you, if this is how your money is invested in your 401(k), is look no further than the current cost of, name it, milk, the roast beef that Steve likes to buy from Kroger, right? Things are costing more right now. And when you're invested too conservatively, the problem is you are losing buying power with every passing day because inflation is going to be higher than your rate of return.

Steve: You've got to stay ahead of inflation. And, you know, people say, "Why do you even bother investing in the stock market, it's a casino, it's gambling. It's great" The reason the stock market is around, and the reason why if you run a major endowment for a college or a pension fund or something like that, you are required to invest a good portion of your money in the stock market is because in the long run, that's how you stay ahead of inflation. So, you know, there's people out there that are gonna get back to saying, "You know what, when I retire, interest rates are finally halfway decent, I'm just gonna put this in something safe so I never worry about it and live off the interest." I mean, that was a farce for decades, but maybe it's coming back into play. But it's really the stock market that is gonna keep that portion of your money outpacing inflation in the long run. But do you want all your money in stocks? No. You know, so what is conservative? Is 60% stock 40% bonds, is that conservative? That's kind of one of those ratios that, you know, people seem to fall back on, that it seems to be one of the more popular mixes. And even there, you know, you could have lost a pretty good chunk of money this year because when interest rates went up that 40% in bonds, that lost a little bit of money.

Amy: There was a guy who for years was coming to every single workshop that we had. Really, really intelligent guy. Engineer, built an app, right? And he would ask the same question like, "Hey, is there anything new, that's come onto the market in the past few months where I can invest my money and not lose any of it?" I understand. Of course, like, there's two things that you want to do when you're investing, you want it to grow, but you also want to protect it. And for people who really, really feel strongly about protecting that money, you want to be as conservative as you possibly can. Well, here's the flip side of that, you can be really conservative with your investments, and you have to focus on saving. If you are a good saver, and I'm talking about, maybe you're saying, "We're gonna pass a vacation this year, we're gonna drive the used car for three or four years extra," if you are consciously making those choices to save, save, save, save, save, well, then maybe you can afford to be a little more conservative in your investments if that helps you sleep better at night. But that's a huge if, right? That's a huge commitment to living your life in a very different way.

Steve: So let's talk about real-world applications. How do you figure this out? Well, first of all, let's start off with what's the ratio. What's the allocation between stock investments and bond investments? Okay, and most statements have this broken out, but, you know, little pie chart, but not all of them. So you want to know, "Okay, am I 50% stock?" I've had many people say, "No, I'm playing it pretty safe," and I look at their statement, no, they're 87% stock. That's not considered conservative. Now, that's fine, if that's your goal, but you've got to acknowledge if you're gonna be, you know, 70%, 80%, 90% stock, especially during volatile times, you're gonna be all over the place on the value in the short term. So what's the ratio of stocks to bonds? And then you gotta break it down into, okay, of that, let's just say 60% in stocks, what kind of stocks do I own? Right? Is it the Standard and Poor's 500? Is it International? I've had people with most of their money in international stocks thinking they're playing it safe. And I would argue that a little bit. Generally, if you want to have a good chunk of your money in the stock market, the Standard and Poor's 500, and it's in almost every 401(k) I've ever seen, or the 500 largest U.S. companies, that's a good place to concentrate. That's a good place to start.

Amy: You know, and another thing you have to think about too is, okay, once you figure out what you're comfortable with, right? And you figure it out on your 401(k), this isn't like a set it and forget it like oh, it's 60, 40, so it's gonna be 60, 40 a year from now, right? Depending on how the stock market does, how the bond market does, you might check it a year from now, and all of a sudden, you want it to be 60, 40, and you're 70, 30. Well, then you rebalance. Right? You keep an eye on that. So it makes me crazy because I do feel like for most people, the 401(k) is your shot at a good retirement, right? And so not paying attention to how it's invested. If it's where you want it to be, what's the proper mix for you, you couldn't really be missing out.

Steve: You can. Now, let's look at bonds just briefly, all bonds are not created equal. Okay, you think you're playing it safe with, let's just say 40% that you have in bonds, well, there are short-term bonds, there are long-term bonds, guess which kind of goes up and down more when interest rates change? Long-term bonds. So if you're trying to play it safe in a rising interest rate environment, you've got bonds that don't come due for 30 years, you might have seen those drop an awful lot. So short-term bonds tend to move less during interest rate fluctuations. I think the point out of this is pay more attention to your allocations in your 401(k) and take a look at it at least once a year and make sure that it's still allocated within your risk tolerance.

Amy: Here's the Allworth advice, how you allocate what's in your 401(k) is dependent on you, right? What are you comfortable with? Remember, history shows stocks will grow your nest egg more than other assets, but those other assets can also be important tools that need to be considered in the overall picture as well. How much is your favorite team worth to you, to your budget? We're gonna talk about people who are going into debt for their team next. You're listening to "Simply Money" here on 55KRC THE Talk Station. You'll listening to "Simply Money" presented by Allworth financial. I'm Amy Wagner along with Steve Sprovach. I don't know, Steve, you're a huge sports fan.

Steve: Yeah.

Amy: Has there ever been a time when you, I don't know...I mean, I guess the Cincinnati teams aren't usually super good, except for last year when the bagels went to the Super Bowl, but has there ever been a time when you considered like, going to a game that was incredibly expensive, and was it worth it, or no?

Steve: No. And I know lots of people that would, but when I hear, you know, $4000, $5,000 a ticket for the Super Bowl, I don't care how big of a fan I am.

Amy: They were $10,000.

Steve: I know. It's getting crazy. I remember the old top six days at, well, Riverfront Stadium at the time gonna watch the Reds, you know, you're married, two kids, let's keep costs down top six was only a couple of bucks a ticket, dollar hotdogs. Boy, times have changed, and it's getting a lot more expensive to go see a halfway decent game anymore.

Amy: LendingTree just did a survey. And they said that, "Hey, most fans say you are willing to spend about 665 bucks to watch your favorite team this year." And 33% of people who are part of this survey said, "Hey, I would even go into debt to see that team do well." I mean, I'm a UK basketball fan, right? And you know what it's like, like, coming out of college, you don't have a lot of money. I remember a couple of years, you know, it was like the team was going to the national championship and I would call and I would say, "Dad, this is an experience, we should go." Right? You know, thinking that maybe my dad would say, "Okay, let's go I'll pay for the ticket" My dad is hardcore of a Kentucky fan as he is. He's like, "You can go and you can pay for it yourself." You know, and I think that especially right now with inflation being so high, listen, when it comes to being a diehard fan, you're hard-pressed to come up with any more than me when it comes to college basketball, when it comes to the Bengals. But I do think seeing people saying they will go into debt makes me a little scared.

Steve: And now you've got gambling, right? You can go to the stadium at least after I think the first of the year and you can bet on top of whatever you pay to get in. So you get to think about even losing more money. Congratulations.

Amy: And I think this study actually said that only it's about 8% of sports spending right now is gambling. I wonder if that's going to change. Here's the Allworth advice. When you look at your monthly expenses, right? Spending money on sports is a want, it's not really a need. I know it feels like it sometimes. Maybe you don't need the most expensive seats to have a great time. Thanks for listening tonight. We hope you'll tune in tomorrow. This is where we're talking about the return on your investments what you need to know and why you shouldn't worry about big drops when they happen. I know that's easier said than done. You've been listening to "Simply Money" presented by Allworth Financial here and 55KRC THE Talk Station.