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2020 was the year of technology. Most of us jumped on Zoom, had food delivered at the door, and spent far too much time on Amazon.

And while tech has dominated our day-to-day living, it also drove NASDAQ up 43% (which says a lot about technology’s role in the market today).

Planning your dream retirement starts with knowing where these fast-paced companies are heading and being mindful of their financial power in the future.

In this episode, you’ll discover how to protect your retirement from fast-growing companies and preserve a plan in a tech-dominated future.

Show Highlights Include:

  • How to protect your investments from ‘tech storms’ and fast-paced markets. (2:32)
  • The most common mix-up about stock index and stock exchange in your retirement planning today. (6:07)
  • How to drive investments through an uncertain future (for finances that outlast Amazon’s replacement). (7:31)
  • Why you need portfolio diversification in a tech-driven market. (11:18)
  • Why you can’t map out the same retirement plan as your coworker (even if you have the same goals). (13:52)

To schedule your free retirement tracking meeting, specifically for first responders, head to http://pensionattention.com/ or call us at 805-409-8150.

Read Full Transcript

Welcome to Pension Attention, the best show for first responders who want to take control of their finances.

After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]

Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are at whatever stage in your career you are in, in order to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at ONE Fire and Police are dedicated to ensuring you take control of your finances and build the life you deserve. To find out more about me or our team of advisors here at ONE Fire and Police, you can go to our website at PensionAttention.com or you can give us a call, you can call us at (805) 409-8150. And again, I want to thank everyone who's listened here each week on the Pension Attention podcast. And if you haven't already done so you can go down and download and subscribe on our website at PensionAttention.com and click on the media tab and click download and subscribe. Or you can go and download it and subscribe the podcast on any platform where you would otherwise listen to a podcast, whether that's Google podcasts, Spotify, the apple app on your phones or SoundCloud and leave us a comment. Let us get some feedback. It's always good to get an idea of what we're doing out there and how you guys like it, because again, we're not in stations right now. So, it's really good to get a sense of what we're doing here on the podcast and reaching each of you on a weekly basis with different topics that we talk about both with our clients. So those clients listening, you've probably heard some of these concepts before with us, and it's just good to have repetition. And if you're not a current client of ours right now, and you're looking for help or advice on your deferred comp plan, what's going on in the universe right now in terms of politics in the market and those kinds of things, you can give us a call (805) 409-8150. You can also go to our website again at PensionAttention.com and there you can set some time. We have a free complimentary discovery meeting, we call it a retirement track review meeting, and we'll take a look at where you're at. Take a look, your deferred comp plan, your cashflows where you're out on the job, whether you got 5 years on or 20 years on good time to take a look at it. And again, if you like the podcast, share it with someone you like, and if you don't like it, I guess, share with someone you don't like, but share it because today we're going to talk about something I'm going to pick up on something we did a couple of weeks ago on Pension Attention and specifically on episode 18, which was entitled, what is the Dow Jones Industrial Average? [02:43.0]

So, I want to pick up on something because in 2020, we heard a lot about the NASDAQ, the national association of securities dealers automated quotations. By the way, if you didn't know it, that's what that actually means. NASDAQ NAS DAQ is the national association of securities dealers, automated quotations, talk about a nerd title, right? And it's the second largest stock exchange in the world. The other one bigger is the New York stock exchange, which is located again on 11 Wall Street in New York, we all heard about that. But unlike the New York stock exchange, why I want to talk about the NASDAQ today, it has no physical trading location trades are made electronically. They're made possible in fact, by like an automated network of computers. So, as you might imagine, as stock exchanges go, the NASDAQ has a little more, we'll call it modern. It actually began operating in 1971. And generally, it is the exchange that attracts more fast paced technology companies. [03:41.4]

A lot of software, computer and internet firms by the way, is why I'm talking about it today because it's a unique index. It's happened over the past year and largely it's been around for a long time, but it's a good one to talk about because it holds apple, Amazon, Google, Microsoft, Facebook, Netflix, and Tesla. They all trade on the NASDAQ. And that's why on the evening news, maybe you will often hear financial reporters say the tech heavy NASDAQ or words like that. It is indeed the technology exchange and with a lot of conversations going around about specific holdings around technology, I thought it was kind of a good idea to talk about what is the NASDAQ. So during the year of COVID-19, the 2020 year, the NASDAQ was up more than 43%, which is pretty amazing. And as you can imagine, naturally, it was the tech companies that drove the 2020 gains in the NASDAQ. I mean, after all let's get on a tech companies were the ones that were really benefiting from the shifting consumer habits, right? The pace of which you know, was really accelerated by the COVID-19 pandemic. [04:43.0]

So, 2020 was a year where we sat at home, watching Netflix, checking Facebook, Googling ourselves and see what comes up maybe and ordering food that was delivered to our front door. Crazy concept. It was the year when I, you know, tech companies found new ways to fill the role, I guess, previously filled by traditional brick and mortar retailers. And as 2020 unfolded aided again by technology, we learned to live and work and he's socially distance shut down economy, whether we liked it or not, that's kind of what happened. Schools went online, zoom conferencing, brought the workplace into our new home office and living room. And I've actually found in or 15 years of working with clients, we've had a really great time with zoom, to be honest, we've been able to talk and converse and be in touch with each other, even though we didn't have to drive to our office in Westlake village. And the NASDAQ seems to you know, it just seems to attract tech companies that are newer, more innovative, perhaps even disruptive. Something I talked about before is technology can be disruptive. I mentioned comments before about blockbuster or the Blackberry. I mean, you don't think technology has a place to be disruptive, just take a look at those companies, right? [05:51.2]

And these companies their intent on fast growth and in 2020, their growth was explosive. I mean, several of these companies became huge, accounting for a larger and larger share of the NASDAQ, the exchanges overall gains. And real quickly, as I talked about an episode 18 with the Dow Jones industrialists, it's an average and the NASDAQ is an exchange. So, when people talk about investing, they sometimes refer to stock indexes and stock exchanges, a stock index to be clear like the Dow or the S & P 500 is a gauge to read the whole market or a sector of that market. In contrast, just to be clear, a stock exchange like the NASDAQ is a place where you buy and sell stocks, bonds, and other securities that are listed on various indexes. So just want to be very clear on the differences between an exchange and an index. [06:43.5]

An index like a Dow Jones, industrial, like we talked about in episode 18, what is the Dow is different than the exchange, where again, we buy and sell stocks and bonds and other securities that are listed on the indexes. And back to my point, I was just making regarding the fast-paced growth that was happening in the NASDAQ to the point, almost that there was a concentration specifically of about 10 companies that make up about one third of the NASDAQ's composites performance during 2020. So, an index like the NASDAQ comprised of about 2000 companies, literally just 10 of these companies are responsible for about one third of the overall NASDAQ performance. That's a tremendous concentration. And it's something that some investors find concerning maybe. So, in 2020, when COVID-19 was still a novel coronavirus, really not well understood and dealt with on a trial-and-error basis, the NASDAQ's tech companies came up with innovative ways to keep us connected while we remained apart, wouldn't you say? I mean, they were all over the marketing campaigns and things like that. [07:46.1]

So, remember the slogan alone together, well, that was made possible by new technology, as well as existing technology that we previously had no really urgent need to use, but in December of 2020, so like six months ago or so that beginning to change as Pfizer specifically rolled out the first Corona virus, vaccine and other companies vaccines have since followed obviously. And when you, couple a vaccine that they're saying is 95% effective with all of the social distancing protocols that we've adopted during this pandemic. You know, I think finally we're achieving a comfort level in reopening our economy, whether we agree with that or not, it's kind of happening, which is great to see really. So, workers are returning to their offices. Students are returning to school. Traffic's definitely picking up obviously here in LA. So, life is slowly returning back to normal. Ultimately our lives will never be the same. I think we all can agree with that given what's happened this past year. But eventually there'll be more normal, I think, than they are right now. I do believe that. And I think we'll find we will continue to use some of the creative technologies that we adopted out of necessity in 2020, but probably not all of it. So although 2020 will be remembered as the, I don't know I'm going to call it the year of technology and the NASDAQ will fondly remember it's 43% gain year, things might change a little bit. [09:04.9]

Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the DROP program? Go to www.pensionattention.com to find out how we can help. [09:20.5]

At some point soon we'll eat in restaurants, we'll return to movie theaters, and we will, once again, drive to work and teachers and students in particular will be back in the classroom and we're starting to see it, hopefully it continues. And our dependence on some of the new technologies we embraced due to the pandemic will lessen maybe not all of them. I mean, our economy will hopefully reopen sooner than later. And on top of that brand new technologies, things that we can't even imagine will emerge in a way rendering some of today's technologies obsolete. So, remember Amazon replaced a lot of thriving businesses that used to be staples in our lives, but are now gone. And eventually something will replace Amazon. I know that's a bold statement, but that's the part of the American way. So, we've gotta be mindful of what's in the future here. So, then there's that threat, the threat that government regulation poses to technology companies, which, you know, that's been a lot of speculation given what's happened last fall, if you'll remember. [10:14.3]

So, have some of these companies become too big for their britches, have they crossed the line and become monopolies? And should they be subject to antitrust regulations if you will. I mean, there's a lot of conversations going on with it. I know we all have our opinions on that. And it's interesting to know real quickly that in the portfolios that we manage some of the holdings that we have, not for everybody, depending on your specific portfolio, but we own apple. We own Amazon, Google, Facebook. We have a lot of these positions, or we have had a lot of positions in our portfolio. So, we've ridden this wave and by the way, pre pandemic, these were companies that we found solid as well, fundamentally sound. So, they were still in our portfolios. They still are, a lot of them are. So, we were gaining a lot of that percentage. You've seen that in your statements as well. So, it's a great thing for us to look at, but it's not that we're just going to sit there on our laurels and say, okay, we're good. We're always continue to look for that next phase. And so, we'll continue to do that as technology changes. And I'm bringing that up largely because when I bring up what an exchange is, which is really what today's podcast is about, it's just good to know the difference between what an exchange is like the New York stock exchange or the NASDAQ versus an index. Again, an exchange is where we trade the indexes, if you will, but it's good to kind of know what some of these exchanges, the companies that are held with inside there, what they're known for, like the NASDAQ is known for technology and maybe the Dow Jones used to be known as more of the industrial. [11:39.9]

And if you go to episode 18, well, there's more about that, but it's interesting to keep that going. And by the way, did you know the biggest companies in America are all tech companies think about that. And these behemoths, right, have part become big by crushing competitors and squeezing suppliers. They often behave like out of control, bullies in school yards here and there. So, you know, many of the billionaire entrepreneurs who founded some of these tech companies are often public portrayed as these Knights in shining armor, claiming moral high ground. And look, they all have their thing. Okay. And I'm not saying the basis of the world and the gates of the world are bad people. I think they're great people either look, they were entrepreneurs and, in our world, we're in a free market. The best part about the U.S market is that still it is free. I do believe that. [12:27.2]

Yes, we can say there's government regulation. There's things going on behind the scenes, but the reality is we still live in a free market and it's a jungle. So, if you're going to put your neck out there and risk it, you're going to make some money doing it capitalism in a way. And there there's pluses and minuses behind that. But it's interesting to note that some of these big companies, some of the five biggest in particular are all tech companies. So, their corporate behavior really kind of Belize around the public narrative and then created a, a lot of enemies, I think, right, including some powerful people in DC. So, as you probably know, several big tech companies are already fighting antitrust lawsuits from almost every state's Attorney General's office. And do you think the legal challenges will increase or decrease as time goes on? It's gonna be interesting, right? So, what do think will happen to the NASDAQ with that regard? If something would happen to big tech, remember 10 tech companies accounted for one third of the NASDAQ gains in 2020. A few accountings for the results of many, so essentially to make sure diversification is necessary. I'm bringing that part up because we talk about all the time and I know it's not a sexy word to talk about, it's definitely not fun. It's a gab, Brad! We know we heard it diversification, diversification, but the reality is we want to make sure that we have good positions, but we diversify the risk into different sectors, different industries, and also different exchanges in different indexes. We wanna make sure we have that right mix for each one of our clients. [13:49.8]

And on that note, I had someone reach out to me last week from the pension tension podcast who heard about the podcast from my colleague, he's actually on the LAPD side. And it was really interesting talking to him because as he's heading towards retirement really close in fact, we started talking about some of the fears and anxieties around going into retirement saying, Hey, I'm no longer active duty. I'm going to be eventually going into retirement where I'm on a fixed pension and my deferred comp plan and my drop program. And then some VC and S K time that he had coming out, kike many of you, right, is really, as you've heard me say before, the pool of sod for the rest of your life. It’s no longer, you can go work at sod day or at force hire or a trade or something like that and click the, that extra $800 or a thousand dollars a day, it's coming from your portfolio. And so, it really becomes paramount to make sure that we structure the portfolio of the deferred comp plan, and eventually the drop in a way that suits your retirement needs. [14:42.0]

And by the way, as a great example, this person who called me last week, and he got referred from another client of ours, which is by the way, a blessed thing. So, thank you all for sharing the podcast, the pension tension podcast, our services, that's how we like to work with each one of you. But remember this they're different even though, a lot of you sit in the same stations and talk to each other and do some of the same things, your specific situation outside of the station and an in particular retirement plans and your deferred comp plan and your family structure is still different. So, treating your retirement plan and your deferred comp plan, eventually your drop the same way is really important because your distribution rate, essentially what you'll be taking in retirement to supplement your pension will be different than maybe someone that, you know, dearly, who you've worked with for 20 years, right? So really important to have that conversation too, specifically design your portfolio around your needs and wants, and then your goals and objectives. And if you haven't gone through that with someone, and if you're listening here right now, and you're not working currently with ONE Fire and Police, you can give us a call. You can call it the (805) 409-8150. You can also go to our website at PensionAttention.com. And actually there, you can set up a complimentary retirement track review meeting with myself or Toby Rodriguez or one of our advisors here who solely focus on working with first responders on their retirement plans and in particular, the investment portfolios that go into a retirement plan. Mind you, we are also going to map out your cashflow, your wealth forecasting, so you know what to expect coming forward. And in this person's case, what to expect in the next five years as the enters drop, and then what to expect now that he's retired technically on paper, what it looks like for him when he leaves the job. [16:24.4]

So, I want to thank you guys for listening to today's episode on Pension Attention. We wanted to focus on today, I wanted to go through what an exchange is, and I use the NASDAQ because it was interesting story gone this past year with tech companies and the NASDAQ has been known as kind of the tech exchange. So really more than anything, it was just good background on an exchange versus an index like we talked about in episode 18 with the Dow. But for anyone listening right now, if you haven't already done so, please make sure to share the podcast and share with a friend or a colleague, it's always good to get it out there. You can go to our website at PensionAttention.com. You click on the media tab, you can download and subscribe, and you can also give us a call. If you're not currently working with an advisor and you want start looking at, you know, as my investment portfolio really structured to how, what I need for retirement, whether you've got 5 years on or 20 years on, it's really good to go through that. So again, you can give us a call at (805) 409-8150. Or you can go to our website at PensionAttention.com and there you can set some time to meet with myself or my partner, Toby Rodriguez, both advisors who focus solely on working with first responders. We also have a team of advisors here that do the same thing. We're dedicated to making sure you take control again of your finances, so that what you have in defer comp plan and whatever the amount and whatever years you have on works for you as you head into those conversations or that phase of life towards drop and ultimately drop exit. And before acting on anything discussed today, remember to speak with a financial advisor near about your specific situation, or again, if you'd like our help, you can visit us at PensionAttention.com or give us a call (805) 409-8150. [17:58.9]

The information in this podcast is educational and general in nature and does not take into consideration the listeners 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. [18:22.3]

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