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Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.

Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [00:26.1]

Brad: Welcome to Make your Money Matter, the show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett, and it's my goal to help you distill the best ideas when it comes to your finances so you can make more confident money moves. Here at One Capital Management, our mission is simple to help our clients and you listeners take control of your finances and build the life you deserve. Friends today, we all know the challenge is no longer the access to information, but rather it's finding the right information. And more importantly, how that information applies to you. And that's my commitment to you here each and every week on the Make your Money Matter podcast because after all your money matters. And I want to thank each of you listening here this week, and for those of you who haven't already done, so you can go to our website at onecapitalmanagement.com and on the media tab, you can click subscribe and you can also download all of the, Make your Money Matter podcast. You can also download and subscribe your make your money matter podcast on any of the platforms where you would download a podcast, whether that's Google podcast, the apple app on your phone, SoundCloud, Spotify, leave us a review, tell us what you think. If you like the show, tell somebody to like, if you don't like the show, I guess tell someone you don't like, but share it because we got a lot to say here. And I'm excited about this week's episode. And I called this week's episode, Defense Wins Championships. Diversification Wins Returns. What does that mean? Let's dig in. [01:53.5]

So, we've all heard that saying before that term, right? Defense wins championships. Now some of us subscribe to it, some of us don't and I think that depends a lot on your sports philosophy. So those are my sports aficionados out there, we probably heard that term before, but I actually want to start this week's episode. And I'm going to switch gears here for a second, right on the topic of the Mexican American war. What? I know big switch up for, but here's why I'm going to nerd out on you for a second. And I want to describe to you a saying that we've also heard, and this, the expression snatch victory from the jaws of defeat, you heard that before? Snatch victory from the jaws of defeat. Well, the origin that statement can be traced all the way back to the Mexican American war, which again, for those history buffs out there took place between 1846 and 1848. Now, as some of you might remember from your high school studies at that time, you know, United States, America was on a Western expansion. We had just completed the annexation of Texas and through the Mexican American war, we acquired New Mexico and California. Look at that, you learned something today, right. [03:02.9]

Now during the war, a regiment of American troops from Virginia had won a hard-fought battle, and a politician described the victory by writing and I quote, they “snatched victory from the jaws of defeat.” Now, as well know, that expression has really become a part of our American lexicon, it's something we've heard before. And it means that you win when it appeared that you would lose, but there's an opposite side to the expression that has also made its way into our nuances and our sayings that is snatch defeat from the jaws of victory. Now this expression would be used when it appeared that something was going to be won, but was actually lost. And normally lost because of mistakes or bad judgment. And let me give you an example, I'm gonna go back to my sports theme for a second. And I think this example I'm gonna say is probably near and dear to any football fan and particularly a football fan for the Seattle Seahawks and or the New England Patriots. [04:03.6]

I know I have a couple of buddies right now, listening to this that are going to be like, Brad, please don't bring the 2015 super bowl up, please, please don't. So, John, Josh, those listening right now, my big Seahawks fans, my apologies, but I am going to bring up the 2015 New England Patriots, Seattle Seahawks super bowl. It was probably one of the better suit bowls I can think of and fits perfectly into what I'm going to say today, around how defense wins championships. I'm going to bring that into the investment world in how diversification wins returns. So, if you recall and watching this game late in the game, it appeared that Seattle, the Seahawks would win. In fact, it will be really difficult for them to lose, but as a CBS sports wrote in the games post-mortem and I quote “what transpired will live in history of this league for as long as football games are played a series of decisions, including the bizarre call by Seattle coach, Pete Carroll, to throw the ball on second down on a receiving route in the crowded middle of the field, that will always be second-guessed.” Now, again, those of you who watch that know exactly what I'm talking about. If you haven't, you'll take a look at YouTube on the highlights, it's actually still a great game to watch, even though it's been six years or so. [05:18.7]

Now coach Carroll took a huge unnecessary risk and he did it late in the game when there was really no time to recover. The basically the game clock had run out. Now referencing the coaches play call one former NFL player tweeted, and I kind of liked this. It was funny. And I quote, “it was the dumbest play call in the history of NFL football.” Now the outcome of this game was much different than what would have been for Seattle all because of bad judgment. Seattle snatched defeat from the jaws of victory. Now coach Carroll being the standup guy that he is admitting his mistake, he quoted as saying, and I quote, “I made the decision to throw there's nobody to blame, but me.” Now for all of those Trojan fans out there, myself included, we love coach Carol here. We’re not exactly stoked on how he left USC, but we love what he did here. And if any of you recall, I'm talking about the 2015 super bowl, one of the better Superbowl’s in modern history, it's not too dissimilar to the same sort of game that was coached in 2006, which has now been referenced as the greatest college game ever played. It was a university of Southern California Trojans versus the university of Texas Longhorns, where Pete Carroll was also the coach at that time and made a very interesting call. I was at this game by the way so, I remember this very vividly. [06:43.5]

He again on fourth and one late in the game took Reggie Bush, the star running back out and decided to put in LenDale White. And again, another late game bizarre call. So sadly, I guess in a way, this isn't the first rodeo for coach Carol and making some gutsy calls late in the game and with very few downs or really any time to recover. And really the result for both these games I'm referencing mainly particularly 2015 Superbowl was the final analysis of is it was a bad decision that led to really a disaster for Seattle. The 2015 super bowl is just one example of snatching defeat from the jaws of victory. In other words, it's also an example of how defense can win championships when you're on offense, when you're in the accumulation phase of your investment life, those listening right now who are maybe in their twenties, thirties, and forties and even fifties, right. You're in those working years, you're working, you're saving, trying to figure out, okay, where do I place these investments? How much cash do I want? How much do I want to put into retirement plans? How much do I want to put into after tax brokerage accounts, by the way, all great questions and all great topics, we try to cover here on the, Make your Money Matter podcast, so, you can go back to our episodes and take a look through them because we actually touch on a lot of those conversations. But again, when you're on offense, when you're building, you're in the accumulation phase of ultimately your retirement or your investing life. [08:15.0]

And offense can be somewhat easy, I know that sounds like crazy to say, because right now in this time period, we're also potentially starting families buying a house, paying off that house, paying for education for those kids. There's a lot going on in this time period. But when you get into retirement, you start realizing that once you reach the top of that mountain, that you've built and you need to start going down it, navigating those landfalls become a little bit more problematic and sometimes harder. Because at that time we don't have as much time to recover, so avoiding some of the mistakes or bigger risks, like some of the examples I brought up today, I know it's a sports analogy, but something to think through, it becomes a little bit more cautious. You have to be a little more cautious and pragmatic about your planning and what you are doing. Right now. if you're in the accumulation phase, I mean, you're running the ball down the field, you’re contributing into your 401k plan or your deferred comp plan or your 403B plan, your retirement plan. You're contributing consistently every two weeks or every month, right. You're putting into your paychecks into those plans. You're putting your allocation to work. Hopefully you're finding a right advisor and a good investment manager to help you choose the right investments to do because you will eventually want to find the right team members to build this team to win the game, which is ultimately getting to retirement or ultimately getting to a stage where you can be financially free to live the life you want to live. [09:38.8]

For some people that's having a happy and healthy retirement, even in their fifties or sixties. I made a comment about a client I met a couple of weeks ago on two weeks ago, his episode on Make your Money Matter about a 25-year-old, who was working pretty heavily and wanted to be financially free by the age of 40. He didn't say retired, he just said he wanted to be able to choose whether or not he wanted to work by the age of 40. So, your unique goals and objectives need to be worked out with a good team member, finding that advisor that you eventually want to be running through. And you know, this brings up another topic, I was thinking about referencing more sports here for a second. And we just saw this in February, for those of us who are football fans and watched the super bowl we saw in February. And again, ironically another Tom Brady team say what you will about the guy, but the guy wins. I mean, let's be honest, but his defense in this game, the Tampa Bay Buccaneers versus the Kansas City chiefs, the defense is who's won. It wasn't Tom Brady side of the ball. The defense side of the ball allowed the Kansas City chief, which was led by Mahomes who puts up points like crazy to put up nine points, nine. So, Tom Brady, his offense put up 31, but the defense held them to nine points. So again, you've probably heard this statement before defense wins championships. And whether you subscribe to that notion or not as it relates to your portfolio and ultimately your retirement plan, especially as you get closer to retirement, defending your allocation, defending your wins is really paramount. [11:08.9]

And you've heard me talk a lot on this program that Make your Money Matter podcast. And for those clients listening, we've talked about this heavily in our review and planning meetings here at One Capital Management. Because when we talk about diversification, remember the title of this week's episode is defense wins championships would have described a little bit on sports analogy and how that can play into your investment approach, especially to get, you know, later in your working life and towards retirement. But then diversification is how we win returns, if we're going to talk about next. We're going to talk about rebalancing. So, what is rebalancing? We'll talk about diversification, but you probably heard me say this before. Rebalancing is essentially the process of realigning, the weightings of your portfolio of assets. So rebalancing, essentially it involves periodically buying or selling assets in a portfolio to maintain the original or desired allocation that we set out for each of our clients. [12:03.8]

So, for example, if we meet with a client and we go through their wealth forecast, we put together their incomes where they're making their money, whether it's from salary commissions, we'll put all together, understand what their outflows are, meaning your mortgages, your lifestyle, whether it's kids’ education, we'll make sure it's a unique plan built for you. We put it all together and we align that towards this client, for example, their goals. Maybe it's 15 years, they only have working right now, so, they have another 15 years to go before retirement. Maybe it's someone who's got 30 years of working already and is looking to retire the next five or 10 years. So, we're looking at understanding and matching the risk tolerance and designing an investment portfolio that will meet the goals and objectives for each of our clients. So, let's say we did an allocation as a balanced portfolio. Something that was a basically equally weighted, maybe a little bit more shifted towards equities, something like a 60 - 40, so 60% was equity driven. 40% was fixed income or bonds. This would be considered somewhat of a balanced portfolio. Now, when we rebalance consistently, we're realigning the weightings of the portfolio based on market fluctuations. So, if we have a run-up, which we've seen, obviously this past year in particular in equities, if we do nothing as your portfolio manager, meaning we're a non-active manager for you, you started January 1st with a hundred thousand dollars and you have 60% of that in equities by December 31st, if you have a 20% year as a hypothetical, that 20% return is on the equity portion, which is 60%. So, from January 1st being at 60%, right, and you have 60% equity going into December 31st, if you don't rebalance, you're going to have a much higher weighting than you wanted before inequities. So, you're going to be more aggressive than you wanted to. [13:53.7]

So, rebalancing and trimming off of those ebbs and flows in the market is really important to diversifying your assets and being active on that diversification. This isn't one of those things where I'm saying, Hey, just buy something and hold it. And by the way, I'm not necessarily giving direct advice here on this. This is where you really want to seek your own advisor and find out what makes sense for you. The topic of diversifying your assets has a couple of sub categories to it, where you want to have some activity to it. I've always used the term actively waiting. You know what that means? It means buying that security. You're buying that position that you like, you researched it. You fundamentally understood the company, that's what we do here at One Capital Management. And we understand their value, whether their dividend paying company or a growth company, but we want to make sure that we, we like the company, so we're not just going to trim away from it next week, unless something drastically happens. We also want to manage that portfolio with the risk and how that fits into the remainder of the positions in your portfolio. So, it's more of an actively waiting, being active on the portfolio rebalancing and ultimately being strategic with each position that we hold for our clients. [14:58.1]

So, in other words, instead of saying realigning we're trimming, which is trimming constantly within the portfolio to keep your allocation, the rebalancing strategy, it's part of active management that fits into what a diversified portfolio should look like. And I should stress this, that a good portfolio should focus on quality, not necessarily quantity. And what I mean by that is two things. One is the actual positions you hold, you want to find quality and making sure what that word quality means for you is where an advisor will come in to help you design that portfolio. But then again, it's also not just on the holdings, but also on the trades. You don't want to be just actively trading to kind of show that you're doing something right. You want to be purposeful with the trades you're making. You want to be very poignant and how you're making those trades, why you are trimming 40, you always want to have purpose to the rebalancing, to the alignment of the portfolio assets and make sure it all works together. And so, if you want to break it down, the words of diversification and rebalancing, there's somewhat defensive words in a way, if you think about it, which is why I'm bringing up the notion of defense wins championships and diversification wins, returns. And diversification, it's a simple understanding. It's the practice of spreading around your investments that your exposure to any one type of assets is limited. [16:11.4]

So, this practice is designed to help reduce the volatility, essentially, as I mentioned earlier of your portfolio over time. And one of the keys to successful investing is learning how to balance your comfort level with risk against your time horizon. So, investing in your retirement nest egg, if you will. And by the way, those listening right now, who hear the word retirement that are in their thirties and forties, you're like Brad, that's so far off. I don't want to think about it. A lot of retirement has to do with how you set your investments up now. So don't just shy away because someone said the word retirement, and it's some sort of retirement plan, you know, booklet or something like that. This isn't that this is making sure we focus on what a retirement plan means to you, whether you're 25 or 30 or getting closer to retirement, because the word retirement really has to do with how you perceive it. When you want to be financially free to choose to work versus having to work, very different. Essentially, instead of you working for your money, you are now having enough assets saved that your money can work for you. That ultimately, if you were to ask me, we were in an elevator together and he gave me 30 seconds on how I would describe retirement. I would say that expression it's when your money starts working for you versus you working for it. [17:25.3]

So, whether you're listening right now, and you're just now starting out your investing life, and you're trying to figure out where to place assets, or maybe you're 10, 20 years into working and you have 401k assets or 403B assets, and you're saying, what do I align all this stuff? And how does it work in some cohesive plan to make sure when I choose to or want to leave work, how do I do that? Can I afford it? Will I have money always in my retirement plan, find that good counsel, find that advisor to help you build that. You can always reach out to us here at One Capital Management. You can go to our website at onecapitalmanagement.com. You can give us a call at (805) 409-8150. You can schedule some time on our website as well with myself or any one of our advisors here at One Capital Management to help you sit down and define your goals and objectives. And if it isn't with us, that's okay. Find someone that you can build trust in because, and again, back to my sports analogy, maybe building that team is ultimately how you win your game. And your game is going to be defined by your goals and objectives that you want for your investments and ultimately for your retirement. Find that star quarterback find that star running back. And those could be a financial advisor. It can be a good tax advisor. You were head coach and team owner in this world. So, finding that advisor, finding that CPA, which by the way, the advisor can help distribute the ball to and all collectively move down the field together. [18:52.1]

So again, there's my sports analogy for the day, but you know what? I think it had a lot to do with how we can protect our assets, grow our assets, because we need to put points on the board to win the game. No doubt, we also have to protect the points being scored on us. So, when our investment life is making sure we have good diversification, weathering the risk and fitting that risk into your tolerance based on time, based on your goals and objectives and making sure you have the right players on the field to again, cohesively and collectively move that ball down the field. [19:23.9]

I want to thank you for listening to Make your Money Matter today. And again, if you haven't done so already, you can go to our website at onecapitalmanagement.com. You can click the media tab, you can download it, subscribe to the podcast. Again, you can also download the podcast on Spotify, SoundCloud, Google podcasts, or the apple app on your phone. And before acting on anything discussed today, remember speak with a financial advisor near you about your specific situation. Or again, if you'd like our help, you can reach us at onecapitalmanagement.com or give us a call (805) 409-8150. [19:57.0]

The information in this podcast is educational and general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [20:20.3]