Advocating for yourself is your biggest weapon in managing your money, especially in investing. You might be confused with the different types of funds, so in this episode, Jen and Jill discuss mutual funds for you to be able to advocate for yourself with little to no help from advisors or experts!
🎙️ Get full show notes here!
https://bit.ly/3SNruLm
💌 Want to save money and spend better in just 5 minutes?
https://www.frugalfriendspodcast.com/friendletter
📑 Get our FREE Modern Frugal Living eBook here!
https://www.frugalfriendspodcast.com/ebook
📣 Submit your bill of the week and get a shoutout from us
https://www.frugalfriendspodcast.com/bill-of-the-week/
💸 Check out our monthly challenge community
http://www.frugalfriendspodcast.com/club
👉🏼 Subscribe for more on YouTube
https://www.youtube.com/frugalfriends
💃🏼 Hang out with us on Instagram!
https://www.instagram.com/frugalfriendspodcast/
Episode three sixty one. What are mutual funds and what do they cost?
Welcome to the Frugal Friends podcast, where you'll learn to save money, embrace simplicity, and liver your life. Here your hosts Jen and Jill.
Welcome to the Frugal Friends podcast. My name is Jen, my name is Jell, and today we are talking about mutual funds. If you have not heard that phrase before, it is an investing term and it can sometimes be confused when we're talking about all the different types of funds. So stock fund, bond fund, index fund, exchange traded fund, mutual fund. So there's all these different types of funds, and we're going to talk about how you figure out what's going in your roth IRA for one k, and if you're working with a financial advisor, how to figure out if that person is working in your best interest or not. Because a lot of the terms we're going to talk about today, it's not gonna be like an education like a you know, Miriam Webster sort of thing. But once you understand what a mutual fund is, you'll be better able to advocate for yourself.
This entire episode will be my Jill Vulnerability Round I kind of view myself, like how musicians will sometimes describe themselves as I don't know how to read music, I just know how to play. It is what I am to this entire podcast episode. I have invested in mutual funds, but I don't know how to read them, talk.
About them, explain them.
So this is equally for me as it is for the rest of you listeners, and I'm going to alongside you and Jen I didn't tell you this, but my approach to this episode is as my own questions come up, I'm going to ask you them because verfability and chances are someone else has similar questions. If you're really literally starting at ground zero, I'm here for you.
I got you, yeah, And this is for you. This is not an investing podcast. We're not getting into the nitty gritty. We are really just educating you enough to do it yourself, do your own investing if that's what you want, and to advocate for yourself. So if you already know, if you've read you The Simple Path to Wealth by Jail Collins, you probably I mean, this is going to be a fun episode to listen to to just reinforce everything, but you're probably not going to learn anything new But if you're looking after this episode you want to learn more Simple Path to Wealth by Jail Collins. It's one of our book club books and it is a highly recommended book in our circle. But first, before we get into mutual funds and how much they cost, this episode is brought to you by stickers. We love a good sticker, whether it is on your bumper, your cup that is not a Stanley cup, your kindle, all the the dresser in your child's room that is designated the only place where they can put their stickers. If you haven't tried that and you're looking for a way to condense all the stickers in your house, try the dresser method. This episode is brought to you by all those stickers because we have our own stickers. Frugal Friends has our own stickers. We have a cool logo bumper sticker. We have a cool sticker with pineapples that represent us wearing sunglasses, us as pineapples wearing sunglasses with dollar bills coming out of the top where the green stuff is. We have those and we want to give them to you for free. You cannot buy these stickers. You can only get them for free by referring people to the friend letter. So if you are on our newsletter, we send it out three times a week with money saving tips and every freebies in every single newsletter and at the bottom of every newsletter, you have a unique code that you can share on your Facebook, in your Instagram profile, in your Slack channel, or your Microsoft teams or whatever.
Share it.
And if one person signs up to receive the friend letter because of your sharing link, because of the link you shared, you get a sticker pack. We will send it to you. That's it, that's all it takes.
Stuck a pack, not even one stick sticker pack.
You get both stickers.
Yes, so head to Frugal friendspodcast dot com to get the friend letter. If you haven't signed up before, or if you're already on the friend letter, then head to the latest release and scroll down to the bottom to get your unique link.
Do it.
Yes, So we do an investing episode maybe once a quarter, just a few times a year, because your investments are not just important to you retiring one day, but the earlier you start investing, the more money you save on the total amount that you need, your total goal amount. So let's say that's just to be easy a million dollars that you want to have a million dollars saved for retirement. If you start early and just invest a little bit per month, overall, you will have to contribute less than if you start later and invest more per month. So it saves you money to start earlier, even with life lower amounts. So that's why we talk about We also want you to know that you can invest on your own via your four oh one k in your IRA. You can do this all on your own. You do not need a professional to do it for you. You absolutely can hire somebody, and we'll talk about kind of a few tips on how to choose that person throughout this episode. But we also want these episodes to help you gain the confidence to do it yourself because you save the most money obviously by doing it yourself. That that's frugality, and you spend a little bit more. The more help you get. You don't have to if you don't want to do it yourself, you don't have to jump straight to hiring a person.
There's stuff you can do in between. So that being.
Said, a few of the few of our favorite investing episodes that we've done. Episode one eighty Minimalist investing. We go through our favorite the ones that I have personally used in the past. Because we can't give you investment advice, We can't tell you what to invest in, but these are things both Jill and I have personally invested in and that if you read any reputable blog or book, they will talk about these and there's a reason that these things get talked about a lot. If you're hearing something new, uh, then that's when to be skeptical. But if you're hearing something over and over and over and over, that's that's going to be a better use of your time and looking into. But Minimalist Investing goes over the one, two, and three fund portfolios that we use, and then episode one six Understanding the stock Market and Investing with Bola Socombie. She is from Clever Girl Finance, and that's where we go through more of the like Miriam Webster, understand the names and terms. So this is just going to be kind of deciphering what's in your four oh one K, what is in your IRA or should be in it. So let's start with our first article. It's from bank Rate and it's what are mutual funds? So Jill, you went through this article before I did, and what is your first impression?
This is my contribution this article. There were other articles in our outline that probably you are Goldie put into it, and it already felt like the step ahead of this article, and I'm like, well, hold on, we need to back up and just define mutual funds before we talk about all the other things that the questions that might come after that. Every other article assumed you already knew, and I didn't.
I couldn't.
I couldn't totally tell you and give you an exact definition. So I loved this article because it really helped me to get a grasp on some of the things that I'm all ready doing to invest for retirement and helps me to read the music. I don't want to, I just want to play the music, but here we go. A mutual fund is an investment vehicle that allows individuals to invest their money along with other investors. So essentially, these funds invest in a collection of securities like stocks, bonds, money market funds. Most mutual funds invest in a large number of those securities, so that's what allows you the investor to diversify your portfolio, which can help to reduce risk overall, So the collection of investments on their own would be too much typically for an average single investor to own. So this opportunity for people to pool their money together can be really beneficial for more your average investors. So one of the ways that I also read in another article that kind of helped me to understand a mutual fund is thankfully this language isn't super out there in terms of what it's talking about. Like, a mutual fund is a mutually funded investment. Meaning if we were all kind of standing around an island in a kitchen and there was a bowl in the middle of it, and every one of us put in one hundred dollars into that bowl, we are mutually funding the money in that bowl. Then the money in that bowl can go and invest in these different securities that we've mentioned. So that's essentially what you're doing with a mutual fund. You're not owning individual stocks, You're you're owning kind of the investment into those stocks. You're mutually funding it. How'd I do jen?
That's perfect, Yes, that is a perfect way to say it. The investment vehicle kind of picture. It's so if I could maybe use a farmer's market let's think about a farmer's market. So farmer's market is in our city. It's in one parking lot, and it's got a bunch of different booths in it, and so and it's in you know, a larger city rather and there can be multiple farmers' markets in the city. Right, So your roth ira or your four oh one k is the city and it can hold as many mutual.
Funds as you want it to. And those are the farmer's markets.
And the farmer's markets are made up of individual booths and those are the stocks, bonds, real estate, utilities, all kinds of different things. You have all kinds of different things at the farmer's market. So that's kind of a way to look at it. And we're we're looking at the actual farmers market today. And there are a lot of different types of mutual funds. So we talk a lot about index funds because they're low cost and we love them. Index funds are a type of mutual fund which not a lot of people realize. It was one of the things. It took me a long time of investing and learning about investing before I put two and two together. So there are different types of funds we've got equity funds, which is you know stocks, all kinds of different stocks, large companies, small companies, growing companies.
And these are.
They're called small cap, which is small, smaller companies, large cap with there are the larger companies, growth funds, growth you know stocks. Those are the companies that are growing rapidly. So there they seem like intimidating terms, but they're not. That's just you know, small, large, growing. And you've got your bond funds, which are the bonds, which are debts that you buy a bond and that money is loaned out to somebody depending on the type of bond. So you got your bond funds, and you have balanced funds, which is a collection of both. Those are those target date funds we talk about so much. That's a balanced fund. And then you've got your index funds, which can be stocks, can be bonds. Index funds just means that it is a it's following a some kind of index, so it is maybe the S and P five hundred or the NAS deck. These are different indexes that kind of track the health of the stock market, and that that index fund is just tracking that. So a total stock market is going to have the total stock market kind of in ratio of and like weight of these large companies to small companies. That's why if you look at the S and P five hundred and the total stock market fund next to each other, those top ten funds are going to be pretty much the same because they're going to be in a similar just the ratios are going to be a little bit different, but they're not going to be that different. The total stock market is just going to have those small, smaller cap stocks in it where the S and P five hundred would it, So they're all very similar, like if you're looking at it, the big players are are very similar.
But I was just going to say, you.
Have these stock funds and these bond funds and balanced funds, but those can all also be index funds too.
One of the questions that came up for me as I was reading through all of these different articles, wonder if you can help explain this jen they're using. They seem to be using the word securities in a couple of different ways that I can't totally. They're like securities like stocks, bonds, et cetera. And then sometimes they're like you buy securities, and maybe that is the same thing. But how are they talking about securities?
What does that mean?
So securities are the stocks per se. There is a probably a really technical definition. So the technical definition is a fungible, negotiable financial instrument that holds some type of monetary value. So it's just something that holds a value stocks, bonds. A mutual fund is a security because it's got stocks and bonds within it. An ETF, it's not a mutual fund, but it kind of runs the same way. So that is a security. It's it's a blanket term for all of these things. Okay, yeah, anything couls value, right right. I was like, well, now, what is a security? But it sounds like that's kind of an umbrella term that they're using.
It is.
Yes, yes, we kind of highlighted this already, but just to reiterate how mutual funds work. They are that pooled investment where lots of people are pulling their money mutually investing it into this fund to own shares. So mutual funds then do invest in many different companies. Once that money gets pulled, then it becomes invested, and some invest in even the entire stock market. As we've talked about before, though they can be invest in other things like bonds. However, when you buy shares in a mutual fund, you don't invest in those companies directly. You own shares in the fund, not the companies the fund selects. But hopefully it is a well managed fund. You've done your due diligence in picking your mutual funds, and so you, the investors, you, the ones who are mutually investing in this fund, will do well as those companies do well. But again, you don't own stock in it. You kind of, yeah, you own.
And for most of us, we don't care about annual shareholder meetings or voting for these companies. Like I only own one single stock, I don't really care, and I don't really participate in any of its goings ons. But for the majority of us, we don't really care about that stuff. We're trying to just lower our risk while still taking enough risk to grow our money to have enough for retirement. So if that's you and you don't, you know, own a hedge fund or anything, then mutual funds can be really great. But there are pros and cons. So pros obviously, they diversify by investing in a large number of securities and they have low minimum investments, so sometimes like ten dollars, but normally around one thousand dollars to three thousand dollars. They are somewhat managed. We'll get into management in the next article. That's where we're gonna really spend a lot of our time. They're very liquid. Index mutual funds are one of the least expensive ways to invest, so there are a lot of pros. They are our favorite way to invest. Second is ETFs, which are very similar in all cover those in a second, but there are cons. So when we talk about mutual funds, not all mutual funds are created equal, right. Somebody can say mutual fund and be thinking one thing, and you could be thinking a totally different thing, and that comes up a lot. So while fees for some mutual funds may be low, like the index mutual funds, the expense ratios on other funds can be quite high, which can hinder your long term wealth building. And when mutual funds were created, I think back in the seventies, it was a fantastic way for the average mom and pop investor to be able to invest in the stock market without the risk of single stocks, without the risk of investing in businesses that may fall. Mutual funds really changed the game, and then index mutual funds changed the game again, and the Internet changed it for everyone. So it's just become more it's just become easier and less expensive to invest and safe and almost safer because of the diversification with every new technology that comes out in the financial sector.
So it's fantastic.
But we started with mutual funds, which when you're thinking about liquidity and safety versus risk, even with their high fees, they were still the way to go, like back in the eighties. So there are some people that still live by and fully support actively managed mutual funds, which you know, back in the eighties nineties not not a bad idea, but embracing technology and how it's evolved investing, you would be blind not to embrace that and so but because of that and because of those people that are still really attached to the old way, mutual funds can also lack transparency, so you won't you may not know exactly what's in them. Index funds, obviously are the exception. Every single index fund you go on Fidelity, Vanguard, Schwab, you're going to see exactly what's in there and the percentage, but if you're not investing directly through them, you may not be able to know that. Maybe a proprietary formula for what the fund, what's in the fund. And then mutual funds, unlike exchange traded funds, which can be bought and sold like stock, mutual funds can only be exchanged at the end of the day. Most people will not care about that. There are some tax advantages to exchange traded funds, so if you are very interested in lowering your your tax lowering your taxes, then than those would be something to look at. If not, then mutual funds are fined. And then this is probably the biggest one. Some mutual funds charge commissions.
Those are called.
Loads, So if you ever hear load, that's a commission in the mutual fund world, and that can seriously, seriously hurt your returns. So these are some of the pros and cons with mutual funds. I think the big takeaway here is not all mutual funds are created equal, and we want you to know the difference in mutual funds. So just one further note on ETFs. They work a lot like index mutual funds, so they'll track an index or an asset, and they can be bought and sold on the exchange. They are they're great. We would talk about index funds and ETFs kind of interchangeably, so whether if you already have ETFs in your portfolio, that's totally fine, it's not. They're passively managed, so I don't think you need to like go out and change your whole portfolio just because we're talking about mutual funds in this episode.
It was also helpful for me to read throughout this article and probably some others about where you are even going to find your mutual funds, Like chances are if you have a four to oh one k IRA that you've invested in, mutual funds may be a part of that. So you can invest in mutual funds through your four roh one k your iras, your five twenty nine's. There's other options of where you can put your money. But that was a helpful marker for me to kind of understand because I wasn't sure as this kind of separate from retirement accounts. Mutual funds are what people are investing in just to like make a little bit of cash in the here and now, an investment or not in retirement, but I what I've come to learn is both, and you can engage in mutual funds in this way. But this is where another question came up for me, and I'm going to ask you Jen before we get into our second article. Will people invest in mutual funds? And I'm going to imagine this is like the non tax advantaged accounts just for Oh, I'd love to just invest some money and maybe have it grow and cash out out on it in five years. Is that also a way not just for retirement planning? Or how might people engage in mutual funds primarily or what are the options?
Yeah? So I definitely so.
Uh that's called like a traditional brokerage account of the account outside of your retirement accounts, And I definitely have index funds in my traditional brokerage account I like to play around with. So we didn't talk about all of the different types of funds, but there's also international, Uh, there is sector specific and I play around with kind of sector specific index funds. There are some maybe slightly actively managed, low cost funds that might have a like a point four or a point five percent expense ratio and that's the that's the fee that's the cost of buying it, whereas a lot of index funds will be like, gosh, below point one, So obviously that's much higher. But that's kind of where I'll play around with that. There are if you're interested in really really optimizing the tax strategy of a taxable brokerage. That's not my expertise. I only really think about investing in for retirement, but I do play around outside of me. Yes, all of I mean I have one, the single stock, but like most of it is, most of my taxable brokerage is in mutual funds.
Can you have a taxable brokerage fund like through your Vanguard Fidelity that kind of thing.
Mm hmmm, yes, you can have both. It's definitely. So most places, like if you're thinking about like investing apps like robin Hood and Acorns and stuff like that, they would all be taxable brokerage.
I think.
Now some of them you can open a retirement account, but most everything is considered taxable brokerage. Only the reputable like places robo advisors and stuff, are going to have the retirement accounts. So yes, everyone offers a like a tax taxable brokerage account, it's only the reputable places that offer retirement accounts, so that's yeah.
If it doesn't.
And my rule of thumb, if the app or whatever fintech thing that you want to try investing in, if it does not offer a roth IRA option, don't touch it. Don't touch it. It's not established enough, it's not worth it. And if you're not maxing out you're roth IRA, don't touch a taxable brokerage there. You should be maxing out all of your retirement accounts before you play with a taxable brokerage. The only money I have in a taxable brokerage was money I put in there from when I was maxing out my four oh one K and roth IRA options, so I do and I no longer put money in that taxable brokerage. That was literally from that season, and that money is just sitting there. So yeah, that's another highly suggest don't play around with taxable brokerages until you've maxed out all your retirement like tax advantaged options.
Beautiful, so so helpful. The next article is from Investipedia. Love it so the bank rate Investipedia, they're really doing it on explaining these things. So this one is mutual funds, different types and how they are priced. So helping us get a little bit more into the nitty gritty now that we know.
What mutual funds are.
Mm hmmm, yes, and so you'll have mutual funds.
We already went into the different types, and you'll see those in your retirement accounts. I forgot to mention this, uh in the last article. But in a lot of four oh one k's, especially if you work for a smaller company, you are going to see those actively managed mutual funds in a lot of four oh one k's, a lot of four oh three b's.
If you're a teacher, I'm.
So sorry here, your four oh three b probably isn't in It's probably in a high feme actively managed fund. Not always, but a lot of the times, unfortunately, you know all so a lot if you're working for a large company and your you know, four oh one K is through like a like a Fidelity or a Vanguard or a Schwab like your set. So a lot of large companies use these, you know, the ones that we love. But definitely check your four oh one K, four O three B et cetera, et cetera to see what the fees are and then you know, should I be prioritizing my IRA or my four a one K, Well, definitely if you have I mean, you're still going to save money in taxes in investing in a high fee uh four oh one K mutual fund versus a taxable brokerage. So again what I said stands, don't touch the taxable brokerages until you've maxed out your retirement, regardless of the options you have. But if you're thinking, like should I be investing in my IRA or my four oh one k, it's time to look at the fees and what kind of mutual fund is in your four oh one k to decide that.
Uh So?
But yeah, I love Investipedia. It is where I cite when I wrote. When I've was a retirement writer, I would cite them all the time, and I think, I, yeah, I wrote for them for a couple months in a in a dream writing gig. So wow, I really yeah, I like this one. When did you think of this one?
Y'all?
Yeah?
Super helpful again, just kind of taking the next steps beyond what a mutual fund is, really helping you to understand it, because I do think while you may not be you may be like me and you don't want to know how to read the music. Who cares if you can play the instrument, But it can certainly help. Any knowledge that we're willing to keep taking in can help inform us better in making even better decisions with what we're investing in. So specifically, we want to look at how are they priced, what can we expect with this? So it's helpful to understand that the value of a mutual fund depends on the performance of the securities in which it invests. So again, if it's investing in stocks or bonds, how well those securities are performing, we'll dictate how well the mutual fund performs. So when you buy a UNI or a share of a mutual fund, you, as the investor, are buying the performance of its portfolio. Said more specifically, it's a part of the portfolio's value. So investing in a share of a mutual fund is different from investing in shares of stock, which we already talked about. So the price of a mutual fund share is referred to as the net asset value or nav NAV per share, sometimes expressed as is it navps. Is that how people would say that navps. So a fund's NAV is derived from dividing the total value of the securities in the portfolio by the total amount of shares outstanding, and so those outstanding shares is referring to those held by all shareholders, institutional investors, or company officers or insiders of the company.
So that's how a.
Mutual fund is priced. I mean, we're not giving you a exact numbers, but this is kind of how they're going to determine what your cost is to buy into the mutual fund. As Gen shared earlier, it could be as low as ten dollars upwards to three thousand, but still much more accessible for the common person than what it would be to maybe invest in like a single stock or another type of investment.
Yeah.
Yeah, Ultimately, we don't care about the NAV price you might go. So I'm looking at the Vanguard Total Stock Market Index Fund VTSAX, which I own a lot of, and the NAV price is one hundred and eight sixteen. I never once have looked at the price per quote unquote share. It doesn't matter. The thing that matters the actual cost of investing into the fund is the expense ratio, and the expense ratio is point oh four percent, and so you can actually get a zero percent expense ratio with Fidelity. I forget that it's just the Fidelity zero their total stock market index fund. But people might say, like, why why is that one have you know zero A. It gets people on the platform, on the Fidelity platform, and B they have money, you know, in their pool, you know, to fund whatever they do with the money. So so that's why Fidelity gives you know, expense ratio free total stock market funds. But VTSA X that's that's the one I own a lot of.
We also have.
Stock index funds at Fidelity too. So but let's talk about the management costs. So let's dive a little deeper into this actively and passively managed. What's the difference. So we said before the index funds, they are passive.
So this is where the.
Mutual fund literally is just set up in the exact ratio to mimic an index kind of like the SMP five hundred. So that's the five hundred largest companies in the stock market, and so it's got the fund has all pretty much all five hundred of those stocks. Sometimes I think it may have like four ninety eight or four ninety nine, I don't know. Sometimes it's weird, but Basically, it's all five hundred of those companies kind of in the ratio that they make.
Up the SMP five hundred index.
So that's that, and the strategy setting it up that way requires less research from analysts and advisors. You don't have to actively management. You can set it up on an algorithm, and so there are fewer expenses and that saving is passed on to investors. And so index funds typically average around point four to four percent in fees, but many are less than point one percent.
A lot.
If you invested in index funds with a robo advisor, which is kind of that mid point between I don't want to do it myself, but I don't want to pay, you know, hundreds of dollars to use a financial planner, I will use a robo advisor, and that you'll see about point two five percent in an expense ratio. In addition, some are in addition to the actual expense ratio of the index fund. So that's like that middle section. So definitely I would say keep your expense ratios below point twenty five as a rule of thumb. It's not like a hard and fast rule, but you absolutely can actively managed funds on the other hand, they have a lot.
A lot of fees.
Wo.
Yeah.
So because they're actively managed with these proprietary ratios of stocks and bonds. So you're gonna have these loads commissions that pay the fund manager. That's called a front end load of up to five percent, plus management fees for the ongoing management. You're going to have ongoing fees for distributions, which actually aren't that those are not uncommon. But that's all in addition. And then my favorite fee that I have ever heard, fait.
This is my absolute favorite.
This is my favorite fee. This is the twelve b dash one fee. And I love that they put this on your like the info sheet, right because it's twelve B dash one fee.
Who's going to question that?
How could you?
Good?
Right?
So much letters and numbers and dashes.
Right, what is a twelve bee? So it's capped at one percent, so it seems very inconspicuous. It is literally the fee that pays for the cost of marketing and selling the fund and other shareholder services.
It's a marketing fee.
Wow.
So and then you've got other fees like custodial, legal, accounting, transfer agent, all that stuff, but like to pay to market the fund. I want to have a good fund, it should market itself.
I want to have a twelve b dash one fee anytime I want money from somebody, what's it for?
Twelve dush one?
Can't question twelby dush one. Yeah this and write in on our taxes, what's this expense? Oh, twelvey dush one.
It's marketing.
It's like stamps. The cost of stamps when I bought my house that car.
So yeah, and there is a there's a special there's there's a special website on the internet that loves actively managed fees. And they went as far as to write an article on this website that shall not be named but like a cow to avoid outrageous mutual fund fees, which is hilarious. But and so they list out all the fees that actively managed funds have front end load, back end load, level load, and then no load. So no load is no commission, and they're like load first, no load, which one's better. You might be looking at the list and thinking no commission or sales charge, sign me up. But for example, a no load fund may charge up to one percent in marketing and services called twelve B one fees, which is less true than the right the load fees definitely charge a fee. Well, I can't say one hundred percent, but I I know from experience that they definitely like the ones I've seen, definitely do and that doesn't sound too bad. But it just goes on to say how much one percent can eat away And they say, you might not realize how much your no load fund is costing you until you've been invested in it for years. You do only know it then if you're keeping an eye on your costs and comparing them to other funds, and it just I love it. I could read the whole thing and just like crack up about how they compare it to a car and keeping a long term view. But essentially they're trying to convince you that paying somebody to manage and market a fee is going to make you more in the long run. And I think the only thing that investors, financial planners, writers, everybody in the world is trying to tell everybody except for this website, is that you can't predict the market like you can create a mutual fund that is for sure going to outperform the market.
Nobody can be sure of that.
There's no way unless you have a gift, the gift of foresight, that you can create and actively manage a mutual fund that is guaranteed in the long run to outperform the market. That's the only thing that we know. So if you created a fund that just mimics the market, because we have that data that it that if you just leave it and let it go with the market, that you will more often than not achieve the same or better results as actively managed funds and you.
Avoid all the fees.
So those studies have been done time and time again, and just know that you nobody even if you watching the market all the time. I ask anybody in early twenty nineteen if they saw twenty twenty one coming twenty twenty twenty twenty two, like if they saw this coming in in not if they saw it coming, but if they saw it coming in the exact years it came.
Yeah, it's it's good. And you know what I can always see coming. It's predictable, consistent, very low to no load, no fees, no load. The bill of the week.
That's right, it's time for the best minute of your entire week. Maybe a baby was born and his name is William. Maybe you paid off your mortgage. Maybe your car died and you're happy to not have to pay that bill anymore. Dust bills, but blow bills, bill clean.
This is the bill up the week.
Hey guys, this is Megan from Alatchua, Florida. My Bill of the week highlights values based spending and if that sounds familiar, it's because I learned it from listening to your podcast, which I love. By the way, so I own a small cleaning business, which means that I'm on my feet a lot. So I finally broke down and decided to invest in a really comfortable, orthopedic pair of shoes which were on the spendy side. I'm not in my twenties anymore Heads Up thirties or the New fifties, but once I splurged then I've found that since wearing them, they're worth every penny. So thank you again, guys. Also, it's a side note, Gainesville, Florida has a real king. Didn't know if you guys knew that. I know you'd mentioned it on a previous episode, but if you ever felt like doing a road trip, you could head up north work to the whys. It's basically like tractor supplies, bigger uglier cousin just heads up, all right, thank you guys.
Love the podcast so so much.
In that first shoes, yes, love, actually looking for my own pair of feel good feet shoes and thinking about splurging. So yes, thirties love. And then also Rural King. I don't know when I would ever go to Gainesville, but the fact I mean Rural King piggies it's got me.
So I still don't think I know what that is. Had you referenced that, Jen.
We yeah, so we talked about it.
I went on a cruise and everyone was talking about their pets, and the people at our table had just very weird pets, like not weird, but just bizarre, like lovely bizarre. One had a skunk and the other had piggies. And she was talking about how she got the piggies as an impulse by from Rural King.
And I stopped her and I was like, tell me about Rural King.
Oh, we can visit it.
And Megan in her comfy footwear, Wow, well.
Done, well, well done.
Yes, And that's a business expense if you wanted to expense it.
It's a business expense, yeah, oh exactly, yes, Well, because taking care of your feet, I think is taking care of the rest of your body. And this is something I've come to know in my sixties, which is my thirties, that you can't just wear the fashionable footwear. It's got to be it's got to make sense, you know, it's got to support you. It's got to support the activities you do all day. Otherwise it's back pain and more for us. So I support you. Well done. Hope that cleaning business is going well.
If you all.
Listening, are please to spend on your comfort and that's where you are implementing some values based spending. Or your name is Bill and you own a rural King, wouldn't that be.
King?
I'm pretty sure that that is. That's a real that's a real situation. So is friendspodcast dot com splash Bill. We can't wait to listen to it. And now it's time for pe.
Take find a friend named Bill and take him to Rural King and record the bill at Rural King. That is my charge, wow to you our community.
How long until that happens?
I don't know, Probably never. What's your still can't get a person named Bill to call? Our listening audience is mail and none of them are named Bill.
It's the joke I believe our entire community is playing on us. They're all like, oh yeah, for sure, I've got a family member named Bill. But it's just funny to make them beg and plead year over year for just a person named Bill.
Year after Oh wow, we're gonna have to go out to like like the that Netflix show of the Magic Guy where he goes magic for Susan's and we're gonna have to like go on the street and find bills like the bill of the week. One day, maybe when we're doing book prom.
I'll be more excited to meet a person named Bill than to find like a dollar bill on the ground.
For sure.
Okay, Lightning round, what's your quote unquote lesson learned the hard way from your savings and investment.
It's too vulnerable, but I have shared it on the podcast so far, so I'll say it again because hopefully it'll help one of you who's listening. I thought I was doing so good years ago.
Still, though when we start, I didn't.
I did not begin investing for retirement until after Jen and I started this podcast. It took me a while because at first I was just like, Yay, I'm getting out of debt and learning how to manage my money. That seems good enough, and that is it's great. And then it was like, oh, okay, there's another step I can be investing now. So I thought I was doing it. I opened up a Vanguard account. Actually I made two mistakes. Oh my okayly reality, open up a Vanguard account roth Ira because our combined household income doesn't we were allowed to have a roth Ira bonus points.
And I did all of it right.
I even I even designated a what do they call it, someone who gets your money after you die.
A beneficiary, thank you.
I even I did all of that, which I've heard a lot of people skip over, but you know, and I put money in it.
I what I thought.
I funded it, I thought, But what I failed to do was invest it. So I set up my whole bank account move the money over. I even set up automatic deposits, so money kept going over into Vanguard month over month.
For at least a full year.
And then I heard Jen say something about a common mistake people make is opening up an account, putting money into it, and then never actually investing it. I'm like, ahaa, those silly folks. And then I was like, wait a second, have I done that? I don't know if I've done that, look looked into it, sure enough, didn't And it still took me probably like a whole month to even come to you, Jen, to be like, what do I have to do now?
I think this is me and I think.
This has been me for a whole year, because that's where all those funky numbers come into play. That those numbers not numbers letters that Jen was listing, like the vs FX A T T see why whatever whatever comes in. If if that doesn't sound familiar to you, like needing to pick a series of upper case letters, then you've not invested yet. So that's got to be part of it. The second mistake that I made with this Ratha Hara is I thought, I don't know you guys. I didn't think about it that much. This is the whole like I don't learn how to read music. I just play music, which also isn't true for me. But I, for whatever reason, thought that this was kind of like a shared thing for my husband and I, that this is our shared retirement account, and that you could kind of only have like one per household. No, each person can have their own ROTH Ira. Each person should have their own roth Ira. So it was like even another year after that that I realized this, like I gotta get Eric roth Ira. So then I knew to actually invest the money. Here we are, so learn from my mistakes. I'll be your bernstain bear.
I can't believe that I wouldn't say that both of you should have one. Yeah, I feel so like religiously adamant that everyone should have their own wroth Ira.
Well yeah, you probably just whoever else would think that it's just kind of one per household. It wasn't necessarily that you kept info from me. It's just whatever I didn't even think to think about.
Yeah, yeah, I mean, which is easy to think when you're it's definitely like it's tax advantage, so you think it's tied to your taxes. If you're married filing jointly in your taxes, you think one rather ray, thank you, But it's.
Not the case.
Everyone can and should have their own rath theory, even if you are a stay at home spouse with no earned income. If you are married filing jointly, and this is where the one thing where it does tie to your taxes, if you're married filing jointly and your spouse has taxable income, then the unworking spouse is eligible for their own roth IRA. Should you guys, should you meet the income threshold? So yes, absolutely, and yeah we got to figured out investing part. That's why there's another reason why it's important to know what a mutual fund is and to know kind of that farmer's market. Like if your four oh one K or your roth IRA is the city, your city has to have things in it and the and the you know, the farmer's market. You can't just put money into it and then it just sits there. It's got to be put into something. And that is the mutual fund, the index fund. So you got to buy. You got to buy the index fund, and the the conduit to get there is just the account. So definitely easy mistakes. I wrote too on here, Sames. So one was an actual mistake and one was an almost mistake. So my actual mistake was I actually forgot to invest money I put into an IRA into a four oh one k rollover. So I put money into I did a four to one k rollover. And this is why we love Capitalize Frugal friendspodcast dot com slash Capitalize We love Capitalize because they do four oh one K, four three B you know all those They do rollovers into iras for you. It's a rollover concierge. It's free. They just make a commission if you choose, like you know, a certain brokerage or roboadvisor, but you don't have to. So we love them because I personally did a four oh one k rollover myself as a retirement expert and let that money just there. Granted I was having a baby and so I didn't look at my investment like I did the rollover, and then just didn't look at anything for a year because I had a newborn. But when I did check in and realized, oh my god, I am so dumb, I made the mistake I tell other people not to make. So that was my biggest I lost a whole year and it was a lot of money. I lost a whole year of growth on that. And it was twenty eighteen, so it wasn't the best year for investments, but you know, won the worst. So that's my biggest and my almost mistake was I almost got into an actively managed fun so when I knew nothing about investing, we had just finished off paying our debt, and I was like, Okay, the next step is to have somebody invest my money for me.
That's just what I thought.
And so we've sought out somebody to manage our money for us. And I'm sitting through this sales pitch and I'm like, why is it a sales pitch?
Why am I here for so long?
Like I don't understand this is I I didn't know anything about investing, but the sales pitch just gave me skeezy vibes. And this was like we knew this person. It's not like this was a stranger to us. This was actually a friend of ours that did this and we sought them out and to do this. And so from the sales pitch, I then I started researching on YouTube ways to invest your money. That is what led me to This was to twenty seventeen, So this was like six months before we started the podcast. I was not into podcasts, but this is what led me to stacking Benjamins afford anything. This is what led me to the simple path to wealth and literally, you know, kind of saved me from making this mistake.
And I almost I went.
As far as saying I will because I was already writing about personal finance at this point, but I was writing about debt payoff and saving money and making money. I was not writing about investing. And so I had like kind of a foothold in the personal finance community, but by no means in the investing or financial independence community. And that's what started me as that initial research. And I went as far as to call our friend and be like, hey, you can manage Travis's money, but I think I'm gonna do my own thing. And he's like, well, actually, we would prefer to do couples together, so we won't do one or the other. And I was like, okay, well then you're gonna do neither.
And that's how I got it out of it.
And that's because I lose friends and make money.
Yeah, But because he was a friend and I didn't want, you know, like to just ship him. I felt like he had already invested all this time in the sales pitch, which I didn't realize what it was initially, I just and I knew it, felt I couldn't name it. And now I know what. Now I know the name.
It's a sales pitch.
It's that twelve B dash one fee if it's free, you're still paying for it, because nothing is free. That two and a half hour, three hour long, god, it was so long sales pitch that I sat in there for where they were not being quote unquote paid. It's that twelve b dash one fee at work. Other people were paying for that.
So yeah, I.
Really dodged a bullet on that one, and I hope that you guys will dodge stain bullet.
Thanks so much for listening everyone. We love sitting here with you, learn in, having fun, laughing. You know what else, We love reading your reviews. That's so fun. Many of you are giving us such kind, thoughtful, enjoyable reviews like this one from Jams Jample. Love that, love reading that and saying that out loud, practical and encouraging. I listen to every episode of this podcast and really enjoy these ladies. I find it encouraging and full of practical tips for helping me stay on course with my financial goals. Thanks Jen and Jill, you are welcome, Jams Jample, thanks listening.
Thank you Jamps Jample. Yes, if you enjoyed the show, please take a minute to leave a rating and review. It helps potential new listeners. Know what our show is about. So if they're looking for a retire early invest all your money in complex strategies and stalks, this is not the show for them.
They'll know that. See y'all next time.
Gorugle Friends is produced by Eric Sirianni.
Jill tell Me.
Let's okay?
Did I tell you about the running shoes, the new running shoes that I bought?
Yes, that you got them on sale, but you're putting them aside until you're ready and need them?
Yes?
Did I tell you the whole story about them?
Maybe not go for it?
So this megan.
Our bill of the week reminded me of this, And I was in the running store on our anniversary weekend. I had to have told this on the show.
Have I not that we were on?
So our anniversary weekend, We're in a running store and I see the running shoe that I usually run at run in on sale for like half off, and I'm like what, And they're the exact shoes, Like this is no compromising. I'll pay one hundred and fifty bucks for shoes like to run in no problem. Once a year, I'll drop it because yes, having good shoes is important, and here they are like the shoes I run in and they're half off, and I'm like, please, may I try I don't need new running shoes right now, but I can't, you know, pass these up. And the I try them on and I'm like, oh, they're perfect. I'm getting them, you know, and I'll just set them aside. And the guys like, you know why they're half off? And I was like, no, you did, Like, there's nothing wrong with them. They're brand new. It's because they're the Gold Edition and they misspelled gold.
Yep, yep.
We did talk about the shoe back to me, Yes, okay, so but I say, I feel like yes because the shoe actually says glod. So I've been calling them my glods and I can't wait to wear them. They feel so comfortable and I love, I love. I put them on the top of my closet and I just get to look at my glods every morning.
What a good year that's gonna be when you're when you're in your glod year?
Yeah, next year?
Next year is my glad ye god, this is so, this is our Jordan year. Everybody seems to forget it's twenty twenty three. This is your Jordan year. Like normally we say when you're twenty three years old, but no, this is everybody's Jordan year and it's you only got a few weeks left. Make it the best because this is the last Jordan year you're.
Getting live ever and glad.
Then if you're lucky, you can have a glod year gold, but not everybody.
It's a globier