Hi everyone. You're listening to Let's Talk Money, brought to you by Bouchet Financial Group. My name is Vinceno Tesla. I'm one of the wealth advisors here at Bouchet Financial Group. I'm a CPA and a CFP. You do a lot of tax planning and wealth advising and financial planning at the firm for our clients. And I'm also joined by my colleague Edward Wilhelm, who is a portfolio analyst. Ed if you want to introduce yourself, please feel free. Yeah.
Thanks Ben. Happy to be on today portfolio analysts. I'd say, you know, my main role is probably more on the trade operations side. I do other firms trading, but happy to be on today and talk about some investments.
Thanks. Yeah. So Ed on the trading side of the firm. So Ed is studying for CFA, which is chartered Chartered Financial Analysts. So Ed's really involved in the investment committee with the firm. Does a lot of financial analysis, marketing market segments and the US economy. You know, we are uh, we are fully invested in the US. We have no international. We sold out of international seven years ago and we've
been underweight international for sixteen years. So ED is heavily involved in that process and selecting the investments we choose for the portfolios. So thanks for coming on, ED. So I just wanted to give a quick market recap for the week. Uh, you know, I'll start off with the major indicy. So the Dow Dow Jones Industrial Average increased point three percent for the week, so not a ton
of valume there. The SMP decreased by one percent over the past week, the Nasdaq decreased by one point six percent over the past week, and the Russell two thousand and twelve by a little bit under a percent. And there was some news that came out this week in regard to a Chinese company and uh, you know their uh progress on AI and it really affected the tech sector in the US, uh obviously due to increase competition,
but we do feel like it's sort of an overreaction. Ed, could you go into a little bit more detail about Deep Seek and and how it affected the tech sector.
Yeah, so it's actually a pretty interesting story. I mean, to my understanding, deep Seek was a you know, originally you know, they're they're a hedge fund or funded by a hedge fund, where you know, they do high frequency. Uh, you know, quantitative based trading. And you know they leverage a string of GPUs, you know, which is used the same hardware that's used to train uh, you know, degenerative AI models that we've seen, you know, like chat GPT
or maybe Grock and someone over there. You decided to work on a generative AI model almost as a side project, and you know, it ended up posting numbers that were very similar, uh, and then better than chat GPT's you know, most recent model. And and the big deal was that they cited doing it with far less GPUs and more outdated GPUs, you know, using one of the videos series. But that really spooked markets, I think one from a
domestic versus international perspective. But then also it did scare the future demand of these GPUs which require you know, in vidious chips. So you know, it's it's understandable, but I definitely agree with you. Then I think it is an overreaction. You know, we're also starting to see some data come out where there may be h some misleading about how many chips they you know, originally said they use when they were training it versus what they actually had.
Uh.
So I mean that's that's one thing for me. It's it's it's definitely hard to trust what you're seeing come out over there at base value. But overall, you know, they're still using in video chips, they're still demand. But this is the risk you start running into when you have such high growth, you know, forecasted for a company like in Vidia. You know, it really just takes one domino or to start a tip and people do get fearful of, you know, those future growth expectations.
Yeah, I mean this kind of reminds me back in the sixties and seventies when we're in a cold war with Russia. Right, not to say that we're in a cold war with China, but I mean there is obviously touching between the US and China, and there has been for a couple of years now. But it's sort of like this this rat race now with AI and you know,
who knows if that company is being completely truthful. I mean, like that could be said to be some sort of conspiracy, but you know, who really knows where this information is coming from and how accurate it really is? Right, and it really you know, Navidia took a large dip, right, and Nvidia is American based company part of the Magnificent seven. Right, So that's Apple, Amazon, Navidia, Tesla, Microsoft, all those large tech companies we have here in the US. And because
of this news, Navidia dropped. It was close to twenty percent in one day. You know, it really affected the stock price in the video. And you know, you know, like I said, who knows how accurate this information really is, Like you said that it is could be an overreaction, and it probably is, but it's definitely something to look out for. This artificial intelligence race that's going on between
American companies and obviously overseas. It's really interesting to see and it's you know, ten years from now, it's kind of hard to picture what it's going to look like.
I mean, it's honestly insane how far it's come thus far, right with chat gybt and some of the other AI tools that are coming out, and it's similar to the right to start with the Internet, right, we had those box you know, boxy white look at computers I remember back in the early two thousands, and that we have these laptops and these phones that we could do pretty much anything on in terms of accessing the Internet and using you know, the applications on a daily basis, so
it's you know, really interesting to see the progression we're seeing an AI. So on January thirty, first, right, just a few short days ago, we had two of the Magnificent seven report earnings. Right, we had Apple and Microsoft report their earnings, and the way those earning calls affected the stock price differed a little bit between both of the companies. So, ed, why don't you go into a little bit more deeper detail on what happened with Apple and Microsoft.
Yeah, no, definitely my pleasure. Overall, a very big week for earnings in general. So we will dive into Apple here first. Pretty positive all around, you know, up around two point seven percent, and they achieved all time revenue your revenue growth of about four percent year over year, so you know, it's still still positive to see. Earnings per share also came in strong, you know, definitely saw
strong holiday sales. You know, it's definitely interesting to see just how sick of Apple is, you know, especially in their iPhone segment, just as you know during holiday season. And then you know, CEO Tim Cook highlighted, you know, Apple came out with you know, their own kind of built in AI role and how it's improving user experience.
So that was something that was highlighted. And the only issue you know, really that Apple is seeing is it is slipping a little bit on iPhone shares, and especially in China, it's it's it's it's losing a little bit of market share over there. So that's the one area
of struggle. You know, I don't think that's too big of a headwind for Apple in the long run, you know, I would I would say that's maybe just a little bit more cyclical in nature, given uh, just the tensions geopolitically between us in China, just on the macro scale. But that's definitely one area of earnings that we're watching specifically, you know, the iPhone sales in China and how the market share is being divided up there and switching over
to Microsoft, they got hit a little bit harder. They were down about four and a half percent. They did have strong performance. They beat Wall Street expectations, you know, strong revenue growth of you know, seventy billion, and then you know also strong earnings per share, so strong profitability. And they've also committed and I'm sure maybe some of you have seen in the news eighty billion towards AI expansion, and I'd say the big issue is that they're facing
some challenges from deep Seek and other AI players. So I mean, you know, part of the news is you know, maybe based on earnings, but then also I think Microsoft got hit a little bit harder on that Deep Seek, the Chinese AI company on that news. Just a few other earnings this week. It's interesting what we're seeing, you know, previously, you know, I mean last year, really the story was mag seven and their growth forecast and just continuing to
you know, post really strong earnings. But now this year we're seeing it broaden out a little bit.
You know.
I think the best example of that is probably IBM. They posted really strong earnings this week. You know, they were up double digit percentages and citing you know a lot of the AI kind of infrastructure and it's where they're seeing a growing software demand for them. So I think we are starting to see that AI trend uh broaden out a little bit, and that's following through to markets. I mean, even if we're just looking at performance, you know, equal weight indices for Nasdaq and S and P five
hundred outperforming their market weighted counterparts. So far year to date, So it's it's definitely nice to see. I think get points to a healthier market. I think it's a much more sustainable market. You know, we're thinking about long term compounding growth. You know, having seven companies drive a majority of returns is is not sustainable to me. So, you know, Vin, I'd love to get your thoughts kind of in that area.
Yeah, I mean, I just think it's really interesting how much these companies are reinvesting in AI. Like I said earlier, it's just a testament to the opportunity from a business standpoint, you know, of the potential growth that you know there will be an AI. I mean, everyone wants to get
their hand in it. Obviously. It's going to affect our lives as a consumer and just as in our personal lives, probably more than the Internet could have ever thought of, right, I mean, just makes things easier, right, I mean chat GPT alone is you know, such an amazing tool and product to me. You know, we you know, we use
it a lot. I use it a lot. I use it as sort of a Google, right if I want to just look you know, I want to look up with the earnings of a company, you know, that released had their earnings called it, so we gotta use chad GPT. If I want to look up the best restaurant from you know, visiting Fort Waterdale, and I want to look at the best restaurants in Fort Lauderdale, I use chat GPT. It's an amazing tool and I'm really excited to see what else is going to pop up in the realm
of AI. We're gonna take a quick break. You're listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health when we manage their wealth for life. I encourage all listeners to call it a eight hundred Talk WGY. That's eight hundred eight two five five nine four nine. Thank you, Hi. This is Vincenzo Testa. I'm giving a well deserved break to your usual host, Stephen Bouchet. You're listening to Let's
Talk Money. I encourage all listeners to call in at eight hundred Talk WGY. That's eight hundred eight two five five nine four nine. So kind of to deflect a little bit from the finance talk. It is groundhog Day, and unfortunately I never knew how to say the first part of that Groundog's name. But Phil did see his shadow, so you know on paper, that means that we're going to be in for the extra six weeks of winter.
But to give you a little bit more clarity before you cry and your pillow, Phil's only been right three times out of the past ten years, and over the past one hundred and thirty years, the predictions have been accurate at a rate of forty percent. So who really knows if spring's had to come early or win there's gonna dawn on us. So I guess we'll have to just wait and see a couple other items on the market side and outlook of the US economy. Let's talk
about the labor market. So, ed, why don't you just dive in a little bit and give a little bit more clarity in the labor market. Oh, we do have a caller. We have Diane from Saratoga, and let's see what Diane has to ask.
Yes, I've been saving some money and I want to put it into bonds. I was told that I have had it in my savings account. No, no save deposit box. If I it's like, give me five thousand, So I want to put it into a bond. But I was told, now if I take up this a large money and put it into the bond, ther IRS will question me about it then not having it on the market someplace.
That's a great question, Diane. So just how to carry out? So you have twenty five thousand in cash and a safe deposit box and you want to basically deposit into account and put it in a bond. Is that you're saying yes?
Now will the IRS question that amount?
Not necessarily?
No.
I mean if you deposited into the to a bank, the bank would probably flag it because it's over a certain deposit limit all at one time. I don't think there'd be any negative implications for you if you were to put it into a bond. I'm not sure what bond you're looking at or your specific you know, financial picture, right, that can give you some more clarity on that, Uh, you know, if we're going to a little bit further.
But Irs, it's just gonna want you to.
Yeah. Yeah, So you would just earn interest on the money that you deposited and invested in that bond, and you would have to report that interest income that you earn on your tax return. Right in the I r S. Obviously it is the head of yeh, so that's the irs is the head of the tax authority in the United States, and you know they administer and monitor folks
tax returns. Right. It sounds like you're a person that probably wouldn't get audited, right, I mean, either way, you'd probably be reporting that interest income correctly on your tax return. So I don't think there'd be any issue or any risk of you getting in trouble if that's your concern.
Yes, I just didn't want them to go. And you know, say, well, you've got this, you know, in your saving box, do you have any more?
You know?
Yeah, yeah, for sure, for sure. You know, at that amount, Diane, I think you'd be safe. I don't think there's really much risk at all. And and uh, yours, you know, show off to your front door and uh, you know, so it's kind of knocking you down there. So I think you're fine doing that, And I don't think there's much risk at all.
Okay, then I won't have anything to fear if I did do it.
Yeah, I think you'd be completely fine. Yep, at that amount. All right, I thank you so much. All right, Diane, thanks for calling in. Again, I encourage encourage all listeners to call on it. Eight hundred talk w g Y. It's eight hundred eight two five five nine four nine. And before Diane called in, I was just going to jump into the labor market in the US with ED and have ED kind of dive in and talk about, you know, the unemployment rate and the employment rate in
the US right now. So why don't you talk about that a little bit further?
Yeah, I mean, you know, this week we didn't get any new labor data specifically, you know, we did have the Federal Reserve meeting. But you know, while we have seen some volatility and you know, non farm payrolls, that's probably the best measure. It's what kind of what the FED really looks at for a month over months labor market changes. You know, if we zoom out and we and we just think about big picture, uh, we are at you know, fairly historically low levels of unemployment. You know,
we see a strong labor market. The FED sees a strong labor market. So I don't I don't think that's too much of a concern for them, you know, just if we're thinking about peace, and you know, of course it only takes one data pri to who off right now, because we are such a data dependent economy, and it does it takes one print to come out and you know, really change the entire narrative.
Yeah, I mean, Ed, You're spot on. You know. I think the common misconception right now is that the economy is not strong, right, and it is. It is strong. And I think the reason being is that, you know, a lot of folks saw the inflation over the past couple of years, and to a lot of folks, that's an indication that the economy is not strong. But there is growth going on in the US economy and and there's a lot of good things going on. There's a
lot of growth potentials on the horizon, right like AI. Obviously, you know we've been talking about a lot during this segment, but AI is going to be a huge growth factor the US economy, the global economy.
Right.
It's going to cut costs for companies, it's gonna make our lives easier and more efficient. So there's definitely you know, a lot of potential, uh, you know, in growth for the US and global economy. And you know, since we're just getting into twenty twenty four, one month into twenty twenty five. I just figured I'd touched on a couple of items on the tax side, right, So I am
a CPA. Uh. You know. Prior to coming to work at Steve's firm, you know, I worked at KPMG, which is a big four accounting firm, flash consulting firm in downtown Albany. So from there I primarily did tax return so you know, moved over to wealth management and those two things go hand in hand. Right. We do tax planning for our clients all the time. Right, It's a huge, uh, outflow source for our clients. Right. Taxes are probably one of the largest bills you will pay acutatively over the
course of your life. Right, So if we could plan around your taxes and save you money, you know we're doing a good thing, right. You know, if we could reduce the bill that you're projected to pay the most over the course of your lifetime, you know there's value in that, right. So we pay attention to taxes very closely.
You know. Like I said, I'm a CPA. You know, I study it well versed in it, so I think it's really important to kind of tie that in with financial planning, you know, just paying attention to the tax updates and what the IRS is doing and any potential changes in legislation that could affect our clients or paying attention to that and you know, making sure that our
clients are aware of it. So you know, as you all know, there's the standard deduction, right, So every year the IRS issues a new standard induction, the standard deduction, it's a deduction that everyone receives, right, no matter you know who you are, you receive a standard reduction. Right. And this year it's increased to fifteen thousand dollars for people that are filing single. Right, it's up a little bit from last year. Right. There's an inflation increase on
the standard reduction every year. So on the flip side, there's the itemized deductions. That's when if you have mortgage interest and charitable contributions in real estate taxes and state income taxes, you combine those all together and if your itemized deductions exceed your standard deduction, then you itemize, right, but if they don't, you just use the standard right. And then for married couples filing jointly, that numbers up
to thirty thousand dollars. Okay, tax brackets will remaining the same. But another common misconception is that if you're in a certain tax bracket, that's your tax rate across all of your income. And that's not the case. Okay, tax brackets are marginal. So there's the ten percent tax bracket, the twelve percent tax bracket, the twenty two to twenty four,
the thirty two, the thirty seven. So a portion, if you're in the thirty seven percent tax bracket, a portion of your income is getting taxed at ten, a portion of your income is getting taxed at twelve, at twenty two and twenty four, and so on and so forth. Right, And the spread of income in which that's getting taxed, it's increased every you're similar to the standard deduction, there's
an inflation increase on the taxability of your money. Right, So the top tax rate is still thirty seven percent. And there are some serve taxes that high earners do have, like the net investment income tax, which is a three point eight percent tax in addition to your marginal tax rate. Find your investment income right. And this is only for higher earners, right, it's not for folks that you know are living in poverty or you know earning fifty thousand
dollars a year. This is for folks that have investment income and their high earners to wait for the high erres to collect more revenue on high earners without you know, basically hiring the top tax rate. Right, So the thirty seven percent tax rate for single tax payers, it's for income over six hundred and twenty six thousand, three hundred and fifty dollars, and for married couples it's seven hundred
and fifty one thousand, six hundred dollars. Right, So between those two numbers, there's only a one hundred and thirty thousand dollars difference, but the difference is one person and two people. So it's kind of a penalty to be married if you're a higher earner because you're going to have a higher tax bill. Right, They don't give you a break on the highest tax rate if you're married. It's actually a penalty to you. So something to pay attention to their you know, this is all part of
tax planning, right. You know, decisions can be made in terms of marriage if if you know, money is the major objective for you as a couple, and it's something to pay attention to because you could really get hit with a larger tax bill if both of you are high earners. We're going to take a quick break and come back and talk about some more tax and trade policies in the US. You're listening to Let's Talk Money. I encourage all listeners to call on Moore back. It's
eight hundred talk WGY. That's eight hundred eighty two five five nine four nine. Hi, you're listening to Let's Talk Money. My name's Vincenzo Tesla. We're coming back from the break and we're gonna go straight to the phones. We have Jim, Yeah, Manny.
First of all, thanks for your time this morning. I have I have a tax question and I'm gonna just give you this scenario private quickly. So my wife and I are looking to retire soon. All of our savings, all of our retirement savings. For the most part, it's going to be in an IRA or a four oh one K. She does have a small pension, maybe about
fifteen thousand dollars a year. But I've got a brokerage account that I've had for a long long time, Vanguard Mutual Funds, and there's probably you know, there's several hundreds of thousands of dollars of capital gains there that I'm just sitting on, and i'd reading more about perhaps like my first year of retirement or maybe even my second year. You know, I don't take anything out of my IRA, I don't take anything. I don't take my Social Security.
I keep deferring that out, and I start to sell some of those mutual funds take the games because it appears that there's like ninety six thousand dollars after my standard deduction that I would actually be taxed at zero percent. Have you heard of this or recommended this kind of strategy for anybody?
Or oh, yeah, for sure, for sure. So you know, as a firm, we don't use mutual funds for one of two reasons, right, we use ETFs and mutual fund You don't use mutual funds because they have high expense ratios, right, Because there's an active manager managing your mutual fund, right, and that costs money. Right, So they're selling in and out of positions within your mutual fund, and there's someone they're paying to do that, right, So mutual funds tend to
have higher expense ratios than ets. On the flip side, the positions are selling in and out of are generating capital gains within themselves. So at the end of the year, Jim, you're getting capital they call capital gain distributions, and you have to report those on your tax return. And and this is not if you sold your mutual one position, you get these issued to you at the end of
the year. Either way, it doesn't matter, right, So you have an uncontrollable amount of money coming into your taxable income, right. So that's and I say this because that's one part of your taxable income that you don't know what that's going to look like at the end of the year, right, And these mutual funds have deadlines, right that you have to sell these positions by within the year or they'll
issue those capital gain distributions either way. So even if you, let's say, sell on December fifteenth, but the deadline was December tenth, they're still going to issue that capital gain distribution for the end of the year, and you have to pick up the capital gain that you sold that you have to realize when you sold out of that position, so you can get double wain meat essentially. So what
you're saying is correct. If you have I believe that it's around that number too, Jim, it's abound ninety eighty to ninety thousand. I don't know off the top of my head, but if you have that in total taxable income, you can have zero percent capital game tax. That's correct, But the pension comes to the play too, right, and then also monitoring how much that capital gain distribution is going to be on the other positions that you don't
sell that year, right. So it's kind of complicated, and it's something that I think you'd have to like really analyze and do it a year end, and I'd probably advise you to work with a professional on it if you're not you know, that educated on you know, the tax side of it, because it does get more complicated than just that. But yes, that is a great strategy. I have advised clients to do that, and we have done you know, very in depth analysis and planning for
clients on that level. So yeah, that's a phenomenal strategy. Definitely would recommend that. Yet, don't pull anything out of the IRA, start exiting those mutual funds, maybe work with an advisor, potentially invest those money into ets and get them out of those high costs mutual funds that are issuing those capital gain distributions at the end of the year anyway that you're paying tax on. So definitely something I've recommended multiple times of many clients and planned around that.
Okay, so the topic of the mutual fund, So these are Vanguard. So I'm in Vanguard mutual funds.
Now.
The problem that I have or is that you know, I've been in them since I was thirty and now I'm sixty, right, so I've got sizeable capital gains and ETFs weren't available then. I mean, so for me to get out of the mutual funds, and I totally understand what you're talking about. Every year I see that they they they whacked me with capital gains that I really didn't see for I didn't wasn't me that sold them.
They did it, right, But you know, primarily Vanguard has been low cost mutual funds as well, at least thirty years ago they were, so Unfortunately time kind of went on and I never had you know, every time I would if I was to sell, you know, I would have been paying capital gains and I was just like, I ain't selling, right, I mean, just gonna keep holding
these things. But now now it comes to a point in order me to convert them to an ETF, I'd have to take a large capital gains hit to do that, right, So that's why it sounds like maybe just bleeding it off slowly might be the best answer. But I understand that I don't know every year. It varies a little bit. Last year, you know, there were twenty thousand of capital
gains this year of fifty thousand. You know, it's like I don't control it, and I know what it is because I see it issued at the end of the year.
Yeah, exactly right. And that brings up an even better point. Right. When I taught to clients about this, you're reluctant to do it, right because you having to pay tax potentially is a scary thing, like paying more tax than you have to, right, But when they're issuing the capital gain districts musions at the end of the year, you're paying it anyway. Right. So what I tell my clients is
rip off the band aid, sell out of it. Figure out how much you're comfortable paying to the I R S and state though, right, like fign that number, work with a professional and tell them that, right, and have them exit those positions for you in efficient manner and tax efficient manner. And if there is any tax do from it. You're ripping. You're paying it year after year
anyway when they issue the capital gain distributions. Right, So if you just get it out of the way, you know, like I said, rip that mandate off and sell those positions and get it over with. It's not something you don't have to worry about anymore. It's not something you have to think again, your vestments will be more efficient,
they'll be more tax efficient. And you know, mutual funds typically, you know, they don't more often than not don't outperform the S and P five hundred anyway, So you know, you know, our philosophy is to just stay out of mutual funds. And you know the advice I would give you is work with work with a professional, rip off that band aid, and do it in the most tax efficient way possible.
Okay, thanks for your time, have a good day.
Thanks him. I encourage all listeners to call in at eight hundred talk WGY. That's eight hundred and eight two five, five, nine four nine. So just to dive a little bit more deeper into the US economy, there is some big news that came out this week regarding tariffs, right, and
you know, obviously Donald Trump is the president. Now he's talked about and posting tariffs on you know, specific countries mainly because of you know, trade imbalances, and he's trying to kind of muscle these countries a little bit more and kind of have them bring their companies and manufacturing into the US and promote US jobs and things of
that nature. And obviously, you know, with Mexico, there are some issues with drug trafficking and you know, Trump feels that Mexico is not doing anything about it and they should be. And we're you know, you know, getting the negatives of the drug trafficking and that Mexico should pay you know, because of this and and start doing something
about it. So, you know, effective in two days, there will be tariffs implicated on Canada, Mexico, and China and ed, why don't you talk a little bit further about those tariffs.
Yeah, So for Canada and in Mexico, we're looking at a twenty five percent tariff each and then while China is going to start at only ten percent. So I mean, he has said that, you know, he's open to adjusting these, you know, I believe I even saw some news I think Canada is going to be implementing a tariff of their own on US goods, or at least plans too. But it is certainly a way for you know, Trump to, as you said, Vinnie, you know, kind of try and
muscle uh these other companies. And I think he really is trying to reassert you know, America as the world superpower. But the one big risk that these tariffs, you know, have is is they are inflationary, and you know, a lot of the aspect of them is passed through directly to retail consumers unfortunately. I mean it's just what studies have shown as far as tariffs go. I think it's you know, almost seventy percent of the costs get passed
through to consumers, you know. And it's also certainly interesting to see what industries are impacted the hardest. So you know, that's kind of something that time will tell and we'll see how these shakes out. But overall, I think the Federal Reserve themselves are concerned about these tariffs, and so are companies. I saw stat today that over one hundred and sixty companies on earnings calls this year have mentioned tariffs. That number is up drastically from you know, last year
where they may be mentioned in a handful. So companies are concerned about them. The Federal Reserve is certainly concerned about them. You know that they paused this week. That was as expected. But one of their you know, big citations for why to pause is, you know, they do see some inflationary potential as a result of these these tariffs.
Yeah, I mean for sure, you know, so anytime in the short term, tariffs are going to be passed on to the consumer, right, But you know, who knows what's going to happen in the long term. Right. Trump is doing this for a reason. He has a long term goal planned to sort of force these companies or these countries' hands and the companies within these countries to you know,
start to do things that benefit America. Right in the short term, it's going to increase costs, and I don't know what's going to happen in the long term, right, But the idea is that you know, Mexico starts fixing the issues of drug trafficking into the US and their government starts doing something about that, and just like balancing out the trade and balance we have with these countries.
So that's really what the goal is here. But in the short term, there might it's obviously going to be inflationary, correct, and who knows what's gonna happen in the long term, But that's really the main goal. And hopefully, you know, if these terrorists stay on, that is what happens, right, these companies start bringing their manufacturing over to US, it creates US jobs and you know, in turn lowers costs of goods in the US. So hopefully we'll see what
happens there. But you know, we're talking earlier in the show about China and how you know, there is obviously tension between the US and China, but you know, that's another risk like this is gonna it's it's heightening global trade tensions for sure, between China and US. And I mean, China is not gonna just put their head down and you know, look the other way and just fold Canada and Mexico, you know, may you know, they really don't have as much leverage as China in terms of their
economy and their reliance on themselves as a nation. So that's definitely a big risk. You know, ticking off China, So just something to kind of monitor there and kind of interested to see what happens moving forward. We're gonna take a quick break. I encourage all listeners to call when we come back at eight hundred Talk WGY. That's
eight hundred eight two five five nine four nine. You're listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Thank you. You're listening to Let's Talk Money, brought to you by Bouchet Financial Group. My name is Vincenzo Testa. I am encouraging all listeners to call in at eight hundred talk WGY. That's eight hundred eight two five five nine four nine.
So you know, like I told you guys before in the show, I am a CPA and a CFP, but I do have another license which is called ECA, and it's what it means is equity compensation associate. Right, So equity compensation is basically supplemental compensation and you receive from your companies, usually public companies, when private companies do this too, giving you ownership in the company that you're working for. Right, and that could be through stock options, that could be
through RSUs, which are restricted stock units. It's basically the company giving you the stock. Stock options are the company allowing you to purchase the stock at a specific locked in price. Right. And then there's espps right in employee stock purchase Plans, which is the company giving you the opportunity to buy the stock at ten to fifteen percent discount potentially, right. So they have all of these forms of equity compensation that companies will give to their employees, right,
and it kind of incentivizes the employees. Right, you're working at this company. You not only you know, you know you're working a collaborative team effort with all the people you work with at this company, but now you own the company essentially, so you kind of have some skin in the game to increase the stock price. So if the company does well on earnings calls, and you know,
moving forward year after year, you're going to get wealthier. Right, So it gives employees some skin in the game, and it gives them some motivation to work harder, you know, for lack of a better term. So one of the things that I do really deeply with clients at the firm, and well, we're working with a lot of companies in the area, you know, Regeneron, Amanti, all these companies in
the Albany area that are public on managing clients equity compensation. Right, And there's a lot of reasons why it's so complex. There's so many factors that go into play when managing equity compensation and the tax ability and you know, aspects of each type of equity compensation are different. Right. When it comes to RSUs, when you get an RSU, there's a vesting period, right, you might have to stay at the company for three years before you're restricted stock units
vest and when they vest, they're all taxes ordinary income. Right. And then if there's any gains on those RSUs and you sell them, their capital gains, whether they're short term or long term. So they're tax much differently than stock options. Right. So stock options, you're not getting actual stock, you're getting the opportunity to purchase the stock at a specific price. Right.
So let's say you worked at Apple, you and you have stock options that the company issued you with an exercise price of twenty dollars and the stock price is one hundred, right, So they didn't invest until three years after you receive them. But the stock price is now one hundred, right, So if you exercise your stock options and purchase Apple at twenty dollars, you now have eighty dollars spread on each share that you have to pick
up as capital gains. So it does differ between which equity comp you're receiving from the tax perspective, and it's something that you have to monitor. And before I go any further, we do have a caller route from Watervali. Hey, good morning, Hey Ralph, how are you?
I'm doing with it, but I'm good to splaining just a couple just actually two quick questions, one being you just talked about tariffs and bringing jobs back to the United States. The jobs are actually now in Chine in
other countries because the labor is so much cheaper. So now while we all want to bring them back, that is also going to increase prices because the companies are going to start to charge They're gonna have to pay more for labor in the United States, which we all deserve that and so those prices are gonna be pissed on a consumer. Also, as far as I can, as far as I think about it, what do you think about that.
Now? For sure? That definitely you know, that's definitely something that could happen to right, And like I, like I said, I don't know what the long term effects of this are going to be. Obviously we all, you know, for the sake of the US, we all hope they're positive and increase the consumer's bottom line, right and good end up being cheaper for sure, that's Ralph, That's a great point. Yeah, definitely something that could occur as an effect of this
and something that we need to be monitored. Is scary, right because you know, the fear of the unknown, right, that's really what we're all feeling here with this. We don't know what's gonna happen, and it's a really scary thing. But I guess we will have to say.
One of the two other questions, what is it an ETF exactly? And I've heard another shows on this on Sunday morning about insurance trust at l I T or l I L t R something.
Yeah, yeah, Life Trust Live Insurance Trust yeah yeah. Okay, So so I'll let Ed as our portfolio analyst here at the firm, and I'll let him describe exchange trade funds to you.
Yeah, so et I think extine trade fund. It's just going to track an index, right, So, I mean while the fund company is going to hold some of the underlying investments, I mean it's essentially just like a mutual fund. You know, most of them are going to be passive, but there are a lot more tax efficient for the fund family, which is why you get all the advantages.
You know, it requires them to do much less active trading on their ends, but I mean for all intensive purposes and for anyone listening, they're essentially just like a mutual fund. They're just not going to pay out those capital gain distributions and they are gonna tend to be on the less expensive side.
Now is that also an index fund?
Yeah, so some of them are index funds. I mean it's going to depend on ETF specifically, and they do have actively managed ETFs now, which are you know, probably more similar to a mutual fund than we'll kind of be in between the price of a passive ETF and a mutual fund.
All right, thank you.
How about the l I T or the life insurance thing trust, I don't remember exactly what are you.
Just curious to what it is? Ralph or give it more specific question.
Yeah, how do you get involved with it?
Is that worth? Is that worth wild investment? Yeah? I mean you know a life insurance try. I mean they're obviously you know, a trust with life insurance in it. Right, So basically you go to the state attorney and having a discussion with them to see if it makes sense for you to do this right. And there's two types of life insurance trust. It's irrevocable right, which is a trust that can't be revoked right by the person who created it. And then there's revocable right, which can be altered.
The terms of it can be altered, but really the purpose of it is to make sure life insurance proceeds get to a beneficiary. Right. And then if you know the individual who passed away had a pretty significant estate, right, there could be a potential a state taxes. So having a life insurance trust, I mean, and this that number could be it has to be like your network has to be like north of like twenty four million if
you're married, So just keep that in mind. But it could help avoid a state taxes or reduce your state tax liability if there is one already avoids probate, right, so ons one passes away. You know, your assets have to go through probate to pay off any creditors or people that want to like you know kind of you know, say you owe them money, So it has to go to that probate court with the trust it does not.
So there's a lot of benefits to it, and I think it's worth talking to with a state attorney and determining if it's the right move for you. O.
Thank you, thank you Jemen for your time. I'm listening on Sunday morning a couple of different shows and there's a lot of information. It's it's fun, ensorbable and sometimes Yeah.
Always feel free to call in. Ralph, thanks for calling. We do have another caller, Mike from Troy. Yeah, how you're doing? Like the show real quick? I just have a couple of quick Mike, you prefer target funds or high yield diversified funds right now? In my work, Ira, Yeah, so we so as a firm, we always recommend our clients because we do look at client four one ks and give guidance on investments right because we're not managing them, so we do give our clients a guidance on investments.
So We're not big proponents of target date funds as far as high yield index funds go. Let ed kind of explain a little bit more about that.
Yeah, So I mean I'll just touch a little bit more on target date funds. I mean, I don't know how familiar you are with them, but those are just gonna change, you know, as time goes on. They're gonna you know, scale back the risk just by using you know, the ratio of equity to fixed income. So you know, as time marches on, they're just going to increase the
allocation of fixed income in the account. But for most investors, what I've seen is is it just leads to them being you know, less risky, probably earlier than they they would like or would be comfortable themselves. So you know, you can you can just miss out on some of those equity returns when you're you're definitely still more comfortable
taking that risk. So that's definitely why we like, uh, you know, kind of a pool of you know, diversified funds that you know, we put together and recommend for our clients. And then on the high yield index fund, can you give me a little bit more information, I mean, is that just a a fixed income fund or you know what type of high yield.
It's an active high yield bond fund.
Okay, yeah, I mean so high yield. Really you're just to get that high yield compared to a normal bond fund, you're gonna take a little bit more credit risk. So you're not gonna be some investing in you know, investment grade companies. You're gonna be looking more like double B triple B rated companies right now. I don't I don't think there's a ton of credit risk out there. I think for the most part you'd be pretty stable. But
so you're gonna clip a higher yield in there. I think it's good to maybe have a portion of your fixed income allocation there. I definitely wouldn't put, you know, your entire fixed income allocation into that fund, though I would definitely leave some, you know, just on the intermediate core side as well.
Okay, thank you very much, thanks for calling in, Mike, So before the break around for the phone calls in rather talking about equity comps. So just want to quickly touch you know, pass implications are different for each type of equity compensation. You don't want to be overly concentrated in the company you're working for right puts you a lot of risk things go south. You might lose your job, stock price might go down, your networks will go down,
could mess up your entire financial plan. So do a lot of analysis for our clients in that regard when it comes to equity comp If you do have any equity comp and you're interested in getting some help, always feel free to reach out. We're coming to the end of the show. I appreciate you all listening in. I can't promise Lea back by next week, but Steve will probably be on. But you're listening to Let's Talk Money.
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