Revealing Retirement Plan Frustrations

Our 2 Cents – Episode #148

Revealing Retirement Plan Frustration

We’re kicking off today’s show a little differently with Getting to Know Steve and Gabriel questions first! Then they’re discussing some challenges and frustrations they’ve heard from potential clients regarding their plans or their investments.

  1. Getting to Know Steve and Gabriel:
    • What was your favorite TV show as a kid?
    • If you could pick any Olympic sport to participate in, what would you choose?
  2. Revealing Retirement Plan Frustrations:
    • My portfolio is still not yet back to breakeven from the prior all-time high of the S&P 500.
    • I won’t have enough time to make up for my market losses.
    • The fees I’m paying are too high.
    • I feel like I’m not getting anything for the fees I’m paying.
    • My portfolio has losing funds in it, it should only have winners.

Request Your Free Consultation Today

Podcast Transcript

Announcer: You are listening to Our 2 Cents with the team from SGL Financial: Building Wealth for Life. Steve Lewit is the president of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.

Gabriel Lewit: Well, hello and welcome to our show today. Got Gabriel Lewit here, Steven Lewit, producer Katie in the background.

Steve Lewit: Full house.

Gabriel Lewit: She’ll never get on the mic. We try.

Steve Lewit: We keep trying.

Gabriel Lewit: We always try. You guys know this. Our listeners, faithful listeners.

Steve Lewit: I just think she’s bashful.

Gabriel Lewit: Well, not everybody wants to be on the radio or the podcast show.

Steve Lewit: Did you ever think you would be on the radio?

Gabriel Lewit: Well-

Steve Lewit: Or podcasting?

Gabriel Lewit: Yeah.

Steve Lewit: You did?

Gabriel Lewit: Yeah, at some point. When they started coming out, I was like, “We should do a show.”

Steve Lewit: Yeah, we did.

Gabriel Lewit: And then we ended up doing a show.

Steve Lewit: We ended up doing one. Good morning.

Gabriel Lewit: Which you’re listening to. Well, yeah. Good afternoon, good evening, good morning, whatever-

Steve Lewit: Everybody.

Gabriel Lewit: … time of day it is for you.

Steve Lewit: Yeah. It’s only going to be 100 degrees here in Buffalo Grove. This is Thursday. We’re recording.

Gabriel Lewit: Yeah, it was hot yesterday.

Steve Lewit: And 100 today.

Gabriel Lewit: It’ll be hot today then it’ll cool off. It’s supposed to be a very nice weekend when you’re hopefully listening to this. And let’s see, we’ve got a couple of topics here lined up for you today. I’m going to mix things up because we always run out of time.

Steve Lewit: We ran out of time. Not always, but last week we did.

Gabriel Lewit: We run low on time, so I’m going to start today off. We’ve got topics about mortgage rates, about challenges with your plan. We’ve got topics on a number of things here.

But I’m going to start off today by asking Steve his favorite ‘getting to know you’ questions.

Steve Lewit: You’re not going to start that way, are-

Gabriel Lewit: I am. I am.

Steve Lewit: I’m in the process of waking up.

Gabriel Lewit: Well, you’ve got your coffee in front of you.

Steve Lewit: I do.

Gabriel Lewit: And I just didn’t want this to be the last tail end of the show like it always is.

Steve Lewit: All right.

Gabriel Lewit: And we want you, our faithful listeners, to get to know us a bit more and have a little bit of fun here to start off the show.

Steve Lewit: And hope you still like us afterwards.

Gabriel Lewit: Well, I would hope so.

Steve Lewit: I would hope so.

Gabriel Lewit: Yeah. All right, so Mr. Lewit, starting question number one is, what was your favorite TV show as a kid?

Steve Lewit: The Lone Ranger. Do you remember-

Gabriel Lewit: When you were a kid I think was well before I was watching TV, so I don’t think I remember it.

Steve Lewit: You wouldn’t know The Lone Ranger.

Gabriel Lewit: Tell what is the-

Steve Lewit: Lone Ranger and his Hi Ho Silver and his buddy Tonto.

Gabriel Lewit: I feel like I vaguely heard about this.

Steve Lewit: Oh, my gosh. Folks, can you believe how uneducated and unworldly and young my son is?

Gabriel Lewit: I would like to know from our listeners if anybody else has watched the Lone Ranger.

Steve Lewit: I bet-

Gabriel Lewit: They can email in just so we have a little fun.

Steve Lewit: I bet 90% of the people know the Masked Man.

Gabriel Lewit: Email into with your stories.

Steve Lewit: No, I’m going to take my grandkids and we’re going to watch The Lone Ranger.

Gabriel Lewit: I don’t know if they’ll want to… Is it a kid show?

Steve Lewit: It’s a Hi Ho Silver cowboy show.

Gabriel Lewit: What do you mean? Hi Ho Silver?

Steve Lewit: Well, he’d get on his white horse. His horse would jump up in the air on his back legs, and he’d go, “Hi ho, Silver! Away!”

How did I do, folks? You know the other show that I didn’t watch that often that was most popular?

Gabriel Lewit: What’s that?

Steve Lewit: Was Howdy Doody

Gabriel Lewit: Howdy Doody?

Steve Lewit: Yes.

Gabriel Lewit: Were there just westerns?

Steve Lewit: No, Howdy Doody was a puppet show.

Gabriel Lewit: Oh.

Steve Lewit: It’s Howdy Doody time. It’s Howdy Doody time. That was a real show.

Gabriel Lewit: Interesting.

Steve Lewit: Yeah.

Gabriel Lewit: Yeah. You didn’t have a lot of options back then, did you?

Steve Lewit: No. And then I got into Disney Kids, or that was a little later on or something.

Gabriel Lewit: Interesting, interesting.

Steve Lewit: No, back then I had a little TV set, black and white. I’m 130 years old.

Gabriel Lewit: I thought you’re 150, right?

Steve Lewit: 150, right. Yeah, so we didn’t have much choices. I mean, my big show at night used to be Ed Sullivan.

Do you remember Ed Sullivan?

Gabriel Lewit: I do not.

Steve Lewit: Oh, my God. I’ve got so much to teach you.

Gabriel Lewit: Well.

Steve Lewit: We should do a nostalgia night.

Gabriel Lewit: These sound exhilarating.

Steve Lewit: Folks, I know you’re with me. I know you know who I’m talking about.

Gabriel Lewit: I got to give you a hard time, obviously.

Steve Lewit: How about Lawrence Welk?

Gabriel Lewit: Nope.

Steve Lewit: Folks, this kid is missing the best of life.

Gabriel Lewit: You know, if I asked you about the shows that my kids are watching today, you wouldn’t know either.

Steve Lewit: I would because my kids…

Gabriel Lewit: You know who Blippi is?

Steve Lewit: Blip? Of course.

Gabriel Lewit: You know the show Bluey?

Steve Lewit: No. Blippi and Bluey.

Gabriel Lewit: Blippi and Bluey, yeah.

Steve Lewit: No, we watched intelligent shows.

Gabriel Lewit: These are great.

Steve Lewit: Howdy Doo-

Gabriel Lewit: Everybody raves about Bluey that’s a parent.

Steve Lewit: Howdy Doody had to be farmer more than-

Gabriel Lewit: And to be fair, that’s not my favorite show right now.

Steve Lewit: What’s your favorite show?

Gabriel Lewit: Well, when I was a kid?

Steve Lewit: Yeah.

Gabriel Lewit: Let’s see. How old kid?

Steve Lewit: When you’re like a kid-kid. Whatever you interpret as kid.

Gabriel Lewit: Well, I don’t know if you guys allowed me to watch TV when I was a kid-kid.

Steve Lewit: We did. We just didn’t allow you to watch-

Gabriel Lewit: I’m not going to say this was not my favorite show, but I vaguely remember watching Mr. Rogers.

Steve Lewit: You loved Mr. Rogers.

Gabriel Lewit: I remember I was bored to tears-

Steve Lewit: So was I.

Gabriel Lewit: … watching Mr. Rogers.

Steve Lewit: We insisted you watch Mr. Rogers and both of us fell asleep.

Gabriel Lewit: Oh, my goodness. When I was a little older. I know I liked the…

Steve Lewit: People love Mr. Rogers.

Gabriel Lewit: The Simpsons a lot. I watched many, many, many seasons of The Simpsons.

Steve Lewit: Yeah, I couldn’t get into the Simpsons.

Gabriel Lewit: Yeah, you know-

Steve Lewit: It reminded me of me.

Gabriel Lewit: I fell off of them after about 10 years of watching them. So yeah, it was good time.

All right, I got one more for you, then we’ll get into some real stuff here.

Steve Lewit: This is real. This is living in me.

Gabriel Lewit: Well, real financial stuff let me say.

Steve Lewit: Okay. All right.

Gabriel Lewit: Well, maybe I’ll do two more. We’ll see. One of them is quick.

Okay, if you could choose an Olympic sport to participate in, whether or not you’re good at it but you could do it in front of the world on the Olympics, what sport would you pick?

Steve Lewit: Ski jumping.

Gabriel Lewit: You’re scared of heights.

Steve Lewit: I know, but you said even if I wasn’t good at it.

Gabriel Lewit: But you wouldn’t do that.

Steve Lewit: I would love to do that. You know how exhilarating that must be?

Gabriel Lewit: I would bet you money you would never go down the slope.

Steve Lewit: I would if I was trained to do it. You know, they start when they’re like three years old.

Gabriel Lewit: The question was not if you were trained. The question is if you just happened to be invited to the Olympics to perform on live TV.

Steve Lewit: But you said if I wasn’t very good at it. So I wouldn’t be very good at it because I’d never get up there. This is perfectly logical. Folks, you understand the logic. I know you do.

All right, the other. Well, of course I would play tennis.

Gabriel Lewit: Yeah?

Steve Lewit: Oh yeah, of course.

Gabriel Lewit: That’s a boring answer.

Steve Lewit: No. Why is that boring?

Gabriel Lewit: Because you’re already good at tennis.

Steve Lewit: All right, then I’d be a 100-yard sprinter.

Gabriel Lewit: A 100-yard sprinter, okay.

Steve Lewit: A 100-meter sprinter.

Gabriel Lewit: A sprinter and not a loser.

Steve Lewit: I sprinted-

Gabriel Lewit: Skier.

Steve Lewit: I sprinted in college for a year.

Gabriel Lewit: I feel like I know that.

Steve Lewit: Yeah, you should know that. Was okay. Was okay. Not great.

Gabriel Lewit: I can see it. I can see it?

Steve Lewit: Yep.

Gabriel Lewit: Well, I would do the… What’s the Cool Runnings? The movie, the bobsled?

Steve Lewit: Oh.

Gabriel Lewit: I would go really slow. Well, I guess you can’t go slow, but I would-

Steve Lewit: How do you go slow?

Gabriel Lewit: I would hold the brakes. Is there a brake thingy? I would hold the brakes the entire time. I just want to do a nice, leisurely bobsled down the tube track. I don’t even know if you can do that.

Steve Lewit: I bet you can do that.

Gabriel Lewit: I know the walls go up like 90…

Steve Lewit: Yeah, but you can’t do that leisurely.

Gabriel Lewit: Yeah, that’s what I’m saying. The problem is you may not be able-

Steve Lewit: You have to go fast.

Gabriel Lewit: I would do it if I was with a pro bobsledder and I could just ride along the back. I think I’d be very scared, but I would do it.

Steve Lewit: That’s like getting into a race car with a professional driver.

Gabriel Lewit: Right, yeah.

Steve Lewit: You’d be really scared.

Gabriel Lewit: Yeah. Yeah, but I would definitely do that. That would be kind of cool.

I would not do the ski jump. I feel like that would be very dangerous.

Steve Lewit: Oh, it’d be so cool flying through the air like that.

Gabriel Lewit: Then you land upside down on your head.

Steve Lewit: They live….

Gabriel Lewit: Okay. Okay. We are going to talk about a couple of things here. We’re going to talk about challenges or frustrations you might be having with your plans or your investments. And now granted, many of you are our clients, so my hope is that you don’t have many challenges or complaints with your plan. At least not that we’ve heard.

But also, many of you out there listening that we are aware of are not our clients yet, and you may have challenges or frustrations with your plan. And so we’re going to talk about these. We were just in fact talking about some of these last night when we did a market update event for our clients.

Steve Lewit: So, if folks are not aware of that, Gabriel, what should they do? The market update?

Gabriel Lewit: Well, if you’re a client of ours, we’re going to send you a copy. If you’re not a client of ours, it’s one of our client-only exclusive updates that we give. If you were really, really, really dying to get your hands on a copy of it, we might be able to send you a recording, too. You just email us at

Steve Lewit: And we’d be happy to…

Gabriel Lewit: I just said to shoot you if-

Steve Lewit: Yeah, but you make it sound like well this is very special for clients.

Gabriel Lewit: Well, it’s for clients only.

Steve Lewit: I know it’s for clients.

Gabriel Lewit: There’ll be some exclusive stuff for our clients, you know?

Steve Lewit: Okay.

Gabriel Lewit: But that’s why we’re sharing some of what we were talking about on that webinar last night here today. And really at the core of it was, hey, it’s been one year, eight months, since the S&P has reached its prior all-time high. And it’s still not back.

Steve Lewit: Well, people don’t realize that.

Gabriel Lewit: Well, from new potential clients that I’ve spoken with, I’ve heard a lot of, oh, I’m up 16% this year. Oh, I’m up 15%, whatever the number is.

I do say to them, well, that does sound good. But the market’s still not back. So I’m guessing, are you back to where you were last January? Oh no, we’re not back there.

Steve Lewit: They don’t seem to care. They just care that they’re at 16%.

Gabriel Lewit: So, I think it’s important to focus on short-term performance is not indicative of long-term good planning, okay? And there’s some really key things here.

But the point is you might be getting frustrated that you’re not back yet if you’re paying attention to where you used to be. That’s the common thing I hear is I’m tired of the market going down or being flat. When are we going to make money again?

Steve Lewit: Yes.

Gabriel Lewit: Right?

Steve Lewit: Well, we came out of an 11-year bull market. It was like everybody was a hero investor. And then we got into this trouble here, and we don’t know where it’s headed. So it’s easy to get frustrated or complain in the mirror, “I should be doing better.”

Gabriel Lewit: Yeah, so one of the complaints would be when are… we’re not back to breakeven yet. So let’s dive into that one, unpack that one a little bit.

The first thing which we do for our clients is we talk about how your portfolio is allocated, okay? So if you’re out there and you’re wondering about your portfolio’s performance, yeah, part of it’s the general broader market. But there’s also a very big component that is what you’re actually invested in. Both are very critical.

Now, the market could come back. If you’re invested in the wrong things, you may not be recovering as well. You might be taking too much risk. Your portfolio might have crashed a lot more than others.

Steve Lewit: Is this our portfolios?

Gabriel Lewit: No, I’m specifically referencing other portfolios.

Steve Lewit: Yeah. I thought. Okay, I missed that. I thought you’re talking about our portfolios. I’m saying, well, I wouldn’t invest in that.

Gabriel Lewit: No, no. Our portfolios are…

Steve Lewit: Well diversified.

Gabriel Lewit: Well diversified. And this is where I always clarify. A lot of people think they’re well diversified, but there’s many, many different ways of diversifying. They’re not all the same either.

Steve Lewit: Well, you think about it. In our portfolios there are 22 different asset classes, 47,000 different securities held in the mutual index funds that we buy in ETFs.

Gabriel Lewit: A very specific screening process for selecting those funds.

Steve Lewit: 22 steps.

Gabriel Lewit: Very robust philosophy that helps guide our decision making. And what I find is most people that come to us with their other portfolios, it is a little more haphazard or a lot more haphazard.

And so that would be step number one is creating a portfolio that’s going to be not haphazard, that’s going to be in alignment with your goals and your time horizons, your objectives. That should start to help you put something in place to succeed regardless of what the market’s going to do.

Steve Lewit: I would take a step back. I think you said the first was the portfolio. I think the first thing you and I normally talk about is short term, long term.

Gabriel Lewit: Well, I started with portfolio just in the sense that what’s top of mind for people is, hey, my portfolio’s not back.

Steve Lewit: It’s not doing well.

Gabriel Lewit: Yeah, not doing… What the heck?

Steve Lewit: Right.

Gabriel Lewit: Yeah, so going a step backwards and talking about your plan before your portfolio would be something that if you come to us and we sit down together, we always start with building your plan. If you’re a client of ours and you want to re-review your plan, we do a lot of those, too.

And then in that plan discussion, we’re going to talk about is the short-term money, long-term money. We’re going to start to craft a customized asset allocation recommendation and a bucket plan. Buckets are assigning different dollars to different buckets based on when you’re going to need the money. Your risk tolerance short term and long term should be less for short-term money, higher for longer term money.

And then we’ll bit by bit start to be able to reposition your portfolio, as well as the asset allocation inside of those different buckets, for better or long-term success.

Steve Lewit: Yeah. So folks, let’s say over the next five years, you need $20,000 a year to cover your income shortfall. So you need $100,000. Well, we’re not going to take that $100,000 and put it into the stock market because the stock market could go down 30%. And then you’re pulling money out at the worst time. And that’s called sequence of return risk. So that first bucket would be very liquid and very safe, so your income for that five years is guaranteed.

Now, the next bucket, we have five years to get you another $100,000. So that would be a little safer. Now, when you go out to the third, fourth, and fifth bucket, you may not need that money for 15, 20 years, if at all. That’s where you can get really aggressive. That’s why you want to put time on your side.

You need two things, diversification that Gabriel’s been talking to you about, and then you need time. If you look at the market short term, you never know because the market short term can go up and down. Long term historically the market always goes up, and that’s what we bet on.

Gabriel Lewit: Yeah, and so I think-

Steve Lewit: But now Gabriel, everybody’s saying out there, but I don’t have 20 years. You know that.

Gabriel Lewit: Yeah. Well, and we’ll talk about that here in a second. But that goes back to this question. If you’re frustrated with your returns or your portfolio, the first question very explicitly just to summarize is, do you have your money set up into buckets? If you do have it bucketed, like most of our clients do, then we look at, oh yeah, the account that’s down right now is probably your long-term bucket.

Remember, we said we have 15, 20 years for this to get to our seven, eight, nine, 10% average that we’re expecting, which is what the market will do over 15, 20 years. So if we’re in year 1.8 of our 20-year bucket and that was by design, not really allowed to be too concerned about there. It’s very early in the ball game.

On the other hand, if you’re like many of our clients before they come to us, they have all of their money in a single allocation. No buckets, just everything in a-

Steve Lewit: Single bucket.

Gabriel Lewit: Everything in a 70/30 single bucket allocation or a target date fund or something, and all their money is down. And that’s where it makes sense to be really concerned. Wow, what am I going to do if this doesn’t recover? This is my retirement bucket.

So we like to break things into sub buckets, really coordinate that with your plan. That should give you that additional peace of mind.

Now, when will the market come back, Dad? I know everybody loves to know that question.

Steve Lewit: Well, according to my crystal ball, it will come back, and it won’t come back. And I don’t know the time horizon on either. My crystal ball is broken today.

Gabriel Lewit: Yeah. It’s one of those questions where when you’re asking it that anybody that really knows anything about investing is going to say, “We don’t know.”

Steve Lewit: We don’t know.

Gabriel Lewit: We don’t know. So that’s why you build your plan to work regardless of when it does or doesn’t with using time on your side like you mentioned.

And then that’s brings us to your follow-up question, Mr. Lewit, what if-

Steve Lewit: What if someone says, “20 years? I’m 65. I may not have 20 years. What if it doesn’t recover?” And so on. So what message is that sending to us?

Gabriel Lewit: It’s saying that you are taking too much risk.

Steve Lewit: Too much risk, yeah. Well, then why are you in that aggressive portfolio?

Gabriel Lewit: One of the cornerstone rules of investing in the stock market is stock market investing is a long-term game. If you don’t have long-term, it may be too risky for you. Or you have to dial down your risk inside the stock market.

So that’s where this goes back to some of the common frustrations people have is I don’t have enough time to invest in the market. I’m taking too much risk. My portfolio’s not back yet.

What else do you commonly hear about frustrations that clients might have when it comes to their planning or their investing, Mr. Lewit?

Steve Lewit: I hear some people before they come to us complain a lot about fees. They feel like they’re getting ripped off to be very honest with you.

Gabriel Lewit: I just talked with a client two weeks ago. He’s in a variable annuity. We called up the company, he’s paying 3.7% fee.

Steve Lewit: Yep. No, that’s totally [inaudible]

Gabriel Lewit: This variable annuity had not grown more than 2%. We did the math. It compounded over the last 10 years, bull market prior to of course, a year or so ago, 2% over 10 years.

He was like, “How could it have only been 2%?” I was like, “It is probably like five or six minus all your fees.”

Steve Lewit: Well, you got three point a half percent fees.

Gabriel Lewit: So yeah, fees are a frustrating thing. And what would you recommend of… A lot of people don’t know their fees, too.

Steve Lewit: No, especially on variable annuities, because they’ll tell you, if you call me-

Gabriel Lewit: They don’t tell you on the…

Steve Lewit: Well, even if you call them and you say… Let’s say you call the insurance company and say, “What are my fees on this variable annuity?” They’ll say, “Okay, your fee is 1%.”

Gabriel Lewit: Yeah, you have an M&E fee of one… Mortality and expense fee.

Steve Lewit: Yeah, 1%. And then they stop. And then you say, “Oh, are there any other fees?” Oh yes, there are. All of a sudden it’s like, well, you’ve got…

Gabriel Lewit: Can you please share them with me?

Steve Lewit: 12b-1 fee, and you have another fee and you’ve got this other fee. It all adds up to three point. So my fee is 3.7. Yeah, but your base fee is 1%.

Gabriel Lewit: Yeah, they’re master spinners.

Steve Lewit: Masters at it.

Gabriel Lewit: Now, if you have a regular portfolio management and you’re being charged one and a half, one and a quarter, those fees also are a little bit on the high side.

Steve Lewit: They are.

Gabriel Lewit: And you might have funds. We see a lot of clients that have… We do 401(k) prescriptions and they’ve chosen really a lot of people just randomly, I noticed a lot of people randomly choose their 401(k) investments. I think they just use a dart. I’m not sure.

Steve Lewit: Yeah. Well, they don’t know.

Gabriel Lewit: And sometimes we find that clients randomly pick okay funds. And other times we find they randomly pick the really high performers that aren’t…

Steve Lewit: They’re…

Gabriel Lewit: Not the high fees, right?

Steve Lewit: Well, the average mutual fund fee is a little less than 1%. Okay, now think about that. Our portfolio runs because we use low cost index funds about 0.25.

So just there we’re improving their performance by 0.75% just by being in a low fee portfolio. So fees count a lot, especially when you take it over 15 or 20 years. Those fees are hundreds of thousands of dollars.

And the other question, Gabriel is, okay, I’m paying a fee. What am I getting for my fee?

Gabriel Lewit: Well, that’s part B of that question. I’m paying this fee and, or this is one of the frustrations, I feel like I’m not getting anything for that fee.

Steve Lewit: Well, how many times have a potential client come in and say, “Yeah, they never call me.”

Gabriel Lewit: Or all they do is call me to recommend buying and selling new funds or new stocks, which we generate in some cases. Brokers are different than advisors generate commissions on trading funds or stocks inside of a portfolio. So those are some of the challenges on the fee side.

Yeah, so there’s frustrations out there. There’s complaints. There’s unhappiness. I think it goes back to having a great plan. I know you and I always preach this, having a plan that you’ve stress tested, that you understand. A lot of people come to us, they don’t understand. If they have a plan, they don’t even understand what it says or how it works.

So making sure you’ve got a really easy to understand plan, a game plan for the future, sense of confidence, peace of mind. Those are all the things that you want to have in place.

Steve Lewit: I think there’s one more piece I’d like to add in here, Gabriel. It’s sometimes our clients will come to us and say, “This index fund in SVON’s portfolio is not doing well. Why don’t they just sell it? Or why didn’t they get rid of bonds when the interest rates are rising? How come they didn’t do that? Why do I have these losers in my portfolio?” Why don’t you say something about that?

Gabriel Lewit: Well, if you believe in an all-weather, again, well diversified with a proper fund portfolio design without market timing, then those types of questions generally fall back into the market timing camp.

And it’s so attractive. I always say market timing is the Odysseus tale of the siren.

Steve Lewit: Oh, good job.

Gabriel Lewit: Right?

Steve Lewit: I’m impressed.

Gabriel Lewit: Where you’re on a boat, you’re going past the island, and you hear the call of the siren and the sounds really good. Oh gosh, we could have predicted that. Oh, why didn’t we see that? Or why didn’t we do this? Why don’t we sell the loser and buy the winner?

All these things when you just say that on the surface, they sound really, really good. And then you dive just a little deeper into it and you realize, well, everybody knows you can’t just sell the losers and find just the winners. It doesn’t work that way. You’re more apt to sell a winner and then buy a loser inadvertently-

Steve Lewit: Well, I’ll give you an example.

Gabriel Lewit: … by market timing.

Steve Lewit: I had a client come in, this is a client, and he said to me, “I do not want international in my portfolio. I am giving you our money to manage, but I do not want international,” which we can do and which we did. And now what is happening with international?

Gabriel Lewit: Well, over time, internationals ebb and flow with US. They’re poised to outperform, and are on the cusp of outperforming in our opinion, US over the next 10 years.

Now again, if we were market timers, you’d say, well, we just buy all internationals then? Why even have US if you think that way? Well, the point is it’s not guaranteed. And we have all the data and all the statistics that say it’s probable. But the goal is to diversify so you win regardless of what the market delivers.

Steve Lewit: Between 2000 and 2013, international outperformed the US. And now the US is out for the last 10 years performed international. And that might be turning. You never know when it’s going to turn, so you have to own it in your portfolio. You’re always going to have winners and losers.

Gabriel Lewit: So that’s the goal of diversification.

I sometimes use the example of, to make it simpler, three different asset classes, three different funds. Let’s just say for example one was up 10%, one was up 5%, and the other was flat, 0%. Okay, so which one of those would you like to own?

Steve Lewit: I would like to own the 10% gain, right?

Gabriel Lewit: You’d always say, I want-

Steve Lewit: Very easy-

Gabriel Lewit: I want the 10%.

Steve Lewit: Easy choice there.

Gabriel Lewit: Well, the average of those would be 5%. And what you’re doing is, let’s say that the 10% then fluctuates up and down, right? It goes up 10, then down to zero and up to 10 and down to zero, and your zero goes up to 10. They’re doing the inverse of each other. And then you have the 5% just steady Eddie.

At the end of the day, if you diversify these three together, you would have a very smooth ride of plus 5% instead of a roller coaster of up 10, down zero, up 10, down zero, up 10, down zero. And that’s the goal of diversification is you’re smoothing out the ride. You’re going to get return that’s somewhere in the middle when you average top performers and lower performers. So if you have three funds, one of them is always going to be the top performer, one of them is going to be the bottom performer. So when you diversify, you’re averaging those together.

So by its very nature, you have to recognize it you’ll never have the top performer in a given year when you diversify. That’s something that a lot of people forget.

Steve Lewit: Well, speaking of nature, it’s human nature. Why don’t we get rid of the bad one?

Gabriel Lewit: Right. Well, if you kept getting rid of everything but the top one, you’d be attempting to market time and pick just the top one.

Steve Lewit: Which you can’t do.

Gabriel Lewit: Which you can’t do, and then you’d be on an up and down rollercoaster.

Steve Lewit: Exactly.

Gabriel Lewit: Which is what we’re trying to avoid. So when we start to walk down this path-

Steve Lewit: And actually, Gabriel, to get 10%, you might go down to zero. You have to go back up 20% to get 10%. So it’s an even bigger rollercoaster than your illustration.

Gabriel Lewit: So that’s the thing with diversification, there’s a running… I joke about it, that you’re always unhappy in the short term. Because there’s always something doing better than your average, because there’s a top performer in that average, even though over the long run, you might do the same as the roller coaster with less risk.

Steve Lewit: Yeah. Look, I buy strawberries. Cartons of strawberries, there’s always a great one. And there’s always one that’s that-

Gabriel Lewit: A sour one.

Steve Lewit: … not so good.

Gabriel Lewit: A sour one. But on average you get a nice basket.

Steve Lewit: Yeah, they’re pretty good, you know?

Gabriel Lewit: Now, it’s only when you get that basket of strawberries that’s all sour. When you’re like, come on, I just paid 6.99 for this.

Steve Lewit: It becomes moldy two days later. It’s like, what did they do with this thing?

Gabriel Lewit: All right, so let’s see. Any other frustrations? I think that’s a pretty good list.

Now look, if you’re out there and you’re not working with us today and you’re frustrated about fees, performance, the stock market, not having a plan, your plan being confusing, not knowing your time horizons, if your asset allocations custom, all these things or anything else, taxes, or long-term care, that’s what we’re here for. You can give us a call: (847) 499-3330 or email us or go to our website.

And if you are a client with us, and many of you we’ve spoken to, and most of you are completely good with where things are at. But if you are a client listening and you haven’t told us that you’re maybe a little bit concerned, call us, right? That’s what we’re here for is to re-review your plan, re-review everything we’ve done to make sure that you’re as confident today as you were when we first implemented that plan together with you.

Steve Lewit: Or if you just want to learn more about the methodology behind your portfolio or look at a better tax plan.

Gabriel Lewit: Well, I will say sometimes if you’re a client of ours, sometimes it’s been a long time since we reviewed what we do and why we do it in detail.

Steve Lewit: Exactly, exactly.

Gabriel Lewit: Oh yeah, that makes sense.

Steve Lewit: Oh yeah, I remember.

Gabriel Lewit: I remember now, Gabriel. Okay, now I’m good again. Right?

Steve Lewit: Yeah, I’m good.

Gabriel Lewit: So that’s the idea. That’s the idea.

Well, thanks for joining us here today. We hope you had an enjoyable time learning a little bit about Steve’s ski jump fantasies.

Steve Lewit: I do think you’re jealous. I think you’re jealous.

Gabriel Lewit: I do not want to crash and burn on the ski slope.

Steve Lewit: No.

Gabriel Lewit: I will crash and burn on the bobsled.

Steve Lewit: You almost killed yourself.

Gabriel Lewit: That’s why I don’t want to do… Yeah, I almost killed myself snowboarding.

Steve Lewit: In a snowboarding pipe.

Gabriel Lewit: So, no more ski jumping or snowboard jumping for me.

Well folks, thanks so much for tuning in. Great to have you on the show. We’ll be back with you next week with some more topics of interest. If you have anything you want us to chat about, questions of course, email us And again, give us a call anytime (847) 499-3330.

Have a wonderful rest of your day. We’ll talk to you next time.

Steve Lewit: Stay well everybody. Bye now.

Gabriel Lewit: Bye-bye.

Announcer: Thanks for listening to Our Two Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330. Or visit us on the web at And be sure to subscribe to join us on next week’s episode.

Prerecorded Voice: Investment Advisory Services are offered through SGL Financial, LLC, an SEC Registered Investment Advisor. Insurance and other financial products are offered separately through individually licensed and appointed agents.