This pod is all about NFT’s - what they are, how they can be used, and whether or not we think NFT’s could be a good investment opportunity.

What is an NFT?

• NFT stands for non-fungible token - which is a special type of cryptographic token which represents something specific and unique.
  
• Using blockchain technology, NFT’s designate an official copy of digital media, which can then be sold by artists, musicians, or sports entities to make money on content.
  
• What does it mean to be non-fungible?  Non-fungible means it’s specific and unique.
  
• Examples non-fungible assets:
  
  • House, painting, trademark
    
• Tokens designate that it’s something digital in nature that’s traded with the blockchain technology - like how bitcoin operates.
  

Examples of NFT’s:

• NBA Top Shot
  
  • Partnership w/ Dapper labs to make digital trading cards or “moments” - short highlight videos that you can own pieces of.  Each moment is serialized and some are more rare to own than others.
    
  • “Packs” sell for as low as $9
    
  • 100’s of thousands of people line up for packs
    
  • Currently - people who get a “pack” are making 10-15x their money per pack
    
  • This won’t last forever- but it could be a good short term speculative investment opportunity.
    
  • Supply will eventually increase enough to meet demand - which will likely drive prices lower.  We don’t know when the supply will match the demand - it clearly has not yet as it’s estimated that each pack of top shots are worth 10-20x what you pay for them.
    
  • These are collectibles - just in a digital format, and they’re on fire right now.
    
  • NBA Top shot has generated over 230M in revenue so far.  They just went live in mid-2020.
    
• Crypto Punks - Collection of 10,000 unique characters with proof of ownership on the Ethereum Blockchain.  No two are exactly alike.  These digital pictures (32 bit) are selling for tens of thousands, if not hundreds of thousands of dollars.  This whole thing sounds to me like it’s out of hand.
  
• Twitter- Jack Dorsey - is selling his first ever twitter tweet for over 2.5M as an NFT
  
• Digital Art - Artists can now sell their art online in a digital format… and people are buying it!
  
• Concert/Sporting Event Tickets
  
  • Useful utility - eliminates fraud in second hand ticket sales
    
  • Allows for owners to actually know who’s at a game vs. who they sold their tickets to
    
  • Allows for venues to capture revenue they wouldn’t normally get in the second hand market (they get a cut of every secondary transaction)
    
• Nike - Crypto Kicks
  
• Louis Vuitton - Using NFT’s as a way of tracking provenance of luxury goods
  
• MLB, NFL, NHL, MLS - All watching and will be jumping into this SOON
  

Security of NFT’s

• Previously did an episode on bitcoin - we said we didn’t like it as an investment.  But the underlying technology of the blockchain we did like.
  
• NFT’s run on this same technology - blockchain technology.
  
• Blockchain technology is a series of interconnected computers that all have a general ledger.  Transactions are recorded on multiple computers, thus verifying the authenticity of the assets it’s tracking.
  

NFT’s as investments

Not a long term investment, stick to index funds and real estate

On this episode we talk about everything related to college, college savings, 529’s, scholarships and student loans

Whether you’re in college now, about to attend, or are thinking about starting college for your kids, this is the episode for you.

Headline of the week: How the coronavirus, the internet and tons of money unexpectedly fueled sports cards' biggest boom

How much it costs for college:

• The average cost of attendance for a student living on campus at a public 4-year in-state institution is $25,864 per year, or $103,456 over 4 years.
  
• Out-of-state students pay $43,721 per year or $174,885 over 4 years; traditional private university students pay $53,949 per year or $215,796 over 4 years
  
• 
  

Community College

• Huge savings over 1st two years, bachelor's degree
  
• The average annual tuition for in-district community college attendance is about $4,00 in 2020
  

Avg student debt: 30,062 coming out of college

• Sit down with your kids and let them know what school costs in real dollars in their budget once they graduate.  Go through a budget with them and show them how that student loan payment is going to impact the money they have available to spend.
  
• Always consider in state schools over out of state schools.  Generally about a 60-70% savings by staying in the state.
  

**SAVE FOR YOUR RETIREMENT BEFORE YOUR CHILD’S COLLEGE IN A 529** CAN’T GET A LOAN ON YOUR RETIREMENT, BUT CAN GET A LOAN FOR COLLEGE.

How to save for college: 529’s

• What is a 529? Tax advantaged account that allows you to save for a child’s college.  Money can be used for tuition and expenses as well as room and board.
  
• Tax deferred money going into account in many cases.   Check your state laws.  Some states allow for a tax break on a certain amount of contributions per year.
  
• Money is tax free if spent on eligible college expenses - room/board/tuition/textbooks
  
• How to start a 529 - Each state has state sponsored 529 plans.  Clark Howard has THE BEST 529 plan guide we have seen online.  We would recommend checking the 529’s he’s rated on his website to see if he likes them (deans list or honor roll).  If he doesn’t, the highest rated plan in the country is the Utah Plan.  Has super low fees.
  

Link to 529 plan guide on Clark’s website: https://clark.com/education/clarks-529-plan-guide/

What investments to do within a 529 - Age based portfolio.  Pick the year closest to childs expected college start date.  Money gets invested based upon how many years until you need it.  Find the funds with the lowest expense ratios just like you do when investing for yourself

Start saving BEFORE you have kids - change beneficiary

Money leftover? study abroad

529 Money can also be used for private school - new law

Ways to get scholarships

• Fastweb - great scholarship search engine.  Can be overwhelming, but search for scholarships LOCALLY.
  Look up your state representatives (house/senate) and look up their websites.

Headline of the week: How A 1% Investment Fee Can Wreck Your Retirement

Why you cannot beat the market

Last few shows we have talked about Gamestop, AMC, Blackberry, Bitcoin.  A bunch of different assets that people have hopped into in hopes of striking it rich.

Things you have to get right when “trading the market”

• Time the buy right - need to find a stock that’s undervalued - purchase at the right time
  
• Time the sell right - How do you know when we have reached the top?
  
• How are you going to determine that it’s time to buy more when you’re down 20% in a week on something?
  
• It’s probably a safe bet that you won’t be able to beat the market.
  

It’s probably a SAFE assumption that over time, you won’t be able to outperform a financial professional….. BUT …. Can they beat the market??

What is an active fund? These are funds that are MANAGED by financial professionals who pick and choose what stocks to buy, when to buy, and what to sell.

What is a passive fund? A passive fund is a fund that tracks an index (think s&p 500 - tracking 500 largest US equities) and the fund just  buys and holds for the most part all of the companies within the fund.  It doesn’t try to pick winners and losers, it just owns a little bit of everything.

What does better?  The active funds where the advisors are buying and selling or the passive fund who just buys and holds?

Morningstar's Active/Passive Barometer August 2020

The Morningstar Active/Passive Barometer is a semiannual report that measures the performance of U.S. active funds against passive peers. The Active/Passive Barometer spans nearly 4,400 unique funds that account for approximately $13.1 trillion in assets, or about 66% of the U.S. fund market.

The Active/Passive Barometer measures active managers’ success in several unique ways:

• It evaluates active funds against passive funds. In this way, the “benchmark” reflects the actual, net-of-fees performance of passive funds
  
• It considers how the average dollar invested in various types of active funds has fared versus the average dollar in the passive composite.
  
• The Active/Passive Barometer is a useful measuring stick that helps investors figure out the odds of succeeding with active funds in different areas.
  

Summary from the report: In general, actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons; only 24% of all active funds topped the average of their passive rivals over the 10-year period ended June 2020

If there's one near-certainty in investing, it is "you get what you don't pay for," as the Vanguard's late founder Jack Bogle said.

• If the pros can’t pick the winners and losers better than the index - why do you think you can?
  
• Remember - keeping fees low is key to investment returns
  
• Buying and holding index funds is the way to build wealth over long periods of time.
  
  • We know this doesn’t sound as fun as buying the latest and greatest HOT stock, but it’s a more sure way to achieve your goals.
    

On this show we did a deep dive on credit scores, how the credit scoring model works.

Headline of the week:

Here’s a budget breakdown of a couple that makes $500,000 a year and still feels average

What is a Credit Score?

Credit Scores help lenders to make decisions about risk as it relates to how YOU handle YOUR money.  Scores can range from 300 - 850 on the FICO scale.

• This show is not intended to make you obsess about your credit score, it’s more to educate you, so you don’t make a huge mistake as it relates to your credit.

Some common myths about credit scores:

• Having less credit accounts is a good thing for your credit score
  
• If you have a lot of money you will have a good credit score
  
• Each person only has 1 credit score
  
• Closing a credit card or line of credit will improve your credit score
  
• If I pay down my debt faster - it will improve my credit score.
  

Things that actually impact your credit score:

1. Payment History - Have you paid your past credit accounts on time? 35% - To maximize this - make all of your payments on time.
   
2. Accounts Owned / Utilization rate - How much of your available credit are you using? 30%.  To maximize this portion of your score - use 10% or less of your open credit lines.
   
3. Length of credit history - How long have you been using credit?  15% -  To maximize this - 7-9 years plus is what they want to see.
   
4. Types of credit history (10%) - What is your mix of credit (mortgages, credit cards, student loans, retail credit (store specific cards), etc.. Showing lenders that you can handle different types of loans (installment -mortgage or student loan and revolving - credit cards) can also improve your score.
   
5. New Credit - (10%) - How much of your credit is new?  The higher % of your credit that is new - the lower this portion of your score goes.
   

Favorite ways to monitor credit:

www.creditkarma.com - gives you 2 credit scores for free from Transunion and Equifax

-Also shows you what credit accounts you have open and is a good way to passively “monitor” your credit

For anyone who wants to see their full credit report (but does not have a score): go to www.annualcreditreport.com 

What to do if you find an error on your credit profile:

1. Contact the business who reported the error - ask them to remove it in writing
   
2. Contact the credit bureau reporting the error and dispute the item on your credit report
   
3. Follow up with the business reporting and the credit card company until it has been removed.
   

Scott:

Brewery: Trillium Brewing

City:  Boston, MA

Beer: Vicinity Double IPA

Type: 92

Score:

Notes: Heavy citrus aromas of pineapple, orange flesh and mango

• Trillium Brewing (Boston, MA) - Vicinity IPA - Episode 016: 92 Points
  

Lance:

Brewery:  Sierra Nevada

City:  Mills River, NC

Beer:  Hop Bullet Double IPA

Type:  Double IPA

Score:  91

• Sierra Nevada (Mills River, NC) - Hop Bullet Double IPA - Episode 016: 91 Points
  

Intro: In this episode we discuss why we hate bonds so much.  We teased this in an episode prior and I’m excited to take a deep dive and talk about our rationale behind the show title.

Headline of the week:

https://www.cnet.com/personal-finance/reddit-and-elon-musk-sent-gamestop-stock-soaring-why-amc-and-blackberry-are-next/

Reddit and Elon Musk sent GameStop stock soaring. Why AMC and BlackBerry are next

• Recording this on Wednesday, 1/27
  
• AMC up 301%, Gamestop up 134%, blackberry up 32%
  
• What’s happening?
  
  • Reddit users are piling into Gamestop and other companies because they noticed there is a heavy short interest in the stock by institutional investors. Obviously there are only a certain number of shares outstanding in these companies, so the reddit users themselves are artificially inflating the stock price… but...
    
  • Shorting a stock essentially just means you’re betting the price will go down.
    
  • If the price of the stock goes up too quickly and you’re shorting it, the people betting against the stock are forced to buy stock at the higher prices to essentially cover their losses.
    
  • It’s sending these near bankrupt companies to the moon
    
• Long story short - some of you may be thinking - should I be buying Game Stop, or Blackberry, or AMC?
  
  • It’s like playing with FIRE… don’t do it.  Eventually - as with all of these get rich quick ideas… people get hurt.  We don’t want that to be you.

Main Topic

Bonds

What is a bond? A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

Bonds are issued by governments and corporations when they want to raise money. By buying a bond, you're giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest payments along the way, usually twice a year.

Unlike stocks, bonds issued by companies give you no ownership rights.

So you don't necessarily benefit from the company's growth, but you won't see as much impact when the company isn't doing as well, either—as long as it still has the resources to stay current on its loans.

Risks of bonds:

• Although bonds are considered safe, there are pitfalls like interest rate risk—one of the primary risks associated with the bond market.
  
• Reinvestment risk means a bond or future cash flows will need to be reinvested in a security with a lower yield.
  
• Callable bonds have provisions that allow the bond issuer to purchase the bond back and retire the issue when interest rates fall.
  
• Default risk occurs when the issuer can't pay the interest or principal in a timely manner or at all.
  
• Inflation risk occurs when the rate of price increases in the economy deteriorates the returns associated with the bond.

Biggest risk of all?

OPPORTUNITY COST!

You could be selling yourself short of reaching your retirement goals by investing in bonds.

Episode 14: Bitcoin - Time to Jump In?

The guys discuss Bitcoin and Cryptocurrency. Should you be investing in bitcoin?  What you need to know to make smart decisions with cryptocurrency.

Headline of the week: Comcast to impose home internet data cap of 1.2 TB in more than a dozen US States next year 

Check www.highspeedinternet.com to see what other options you have for broadband in your area.

Websites mentioned during the podcast:

https://clark.com/credit/credit-freeze-and-thaw-guide/

Main Topic

As of this recording- Bitcoin has gone from 24k at Christmas to now almost 38k per coin.  Everyone is wanting in on the action…. But before you hop in - let’s talk about what it is.

What is bitcoin? - A cryptocurrency that was invented in 2008 by someone going by the name of Satoshi Nakamoto.

• Decentralized digital currency where there is no central bank where the currency can be sent from user to user on a peer to peer platform.
  
• Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
  
• Bitcoins are created as a reward for a process known as mining.
  

Bitcoin’s Usefulness:

• Bitcoin runs on blockchain technology.  This is a revolutionary technology that allows for a group of computers to independently verify millions of transactions.
  
• The ledger is a very secure way to account for transactions as there are thousands of computers verifying transactions and verifying them.
  

Bitcoin as an investment

• Everyone wants to know - should they be INVESTING in bitcoin?
  
• Obviously it’s gone from 24k per coin to ~38k as of this recording.
  
• Well - let’s think about what we just said - what is bitcoin?  It’s a type of currency - and not a normal type of currency - it’s a crypto currency.
  
• Does Currency normally fluctuate in value this much?  No- when you go to buy a loaf of bread it’s pretty consistent in price.
  
• Bitcoin is something that’s new - it’s exciting and SPECULATORS are driving the price of bitcoin higher.  While bitcoin has utility as a currency - it’s not really a true investment, or should not be seen as one.
  
• Should you invest in bitcoin-  We would recommend not to as it has a lot of the signs of a bubble.
  

Dangers of bitcoin

• No regulation
• Fraud/Theft
• No Tangible Valuation

Hops Showdown

Scott:

Brewery: Warwick Farm Brewing

City: Jamison, PA

Beer: Double Dry Hopped Expressions

Type: Hazy IPA

Score: 94

Lance:

Brewery:  Highland Brewing

City:  Asheville, NC

Beer:  Cold Mountain Spiced Winter Ale

Type:  Winter Ale

Score:  89

Episode 13: Goal Setting and Tracking

On this show we discuss goal setting and tracking as we head into the new year.  Some tools and tips we use in our own lives that will hopefully help each of you to optimize your financial future.

Dollars and Hops goals sheet:

2021 Dollars and Hops Goals Sheet

Goal setting and tracking:

Why is this important?

• Many of us have big goals, but we don’t know how we’re going to accomplish them.
  
• Goals don’t just have to be financial in nature, they can be spiritual, intellectual, career oriented, family oriented, etc..
  
• The key is to think big and set goals for yourself EVERY year
  
• Make this a FUN thing - do it with your spouse.  Your goals don’t have to be the same as your spouses, but each of you should have goals
  

Goals should be written on paper - ACTUAL paper

• Big goals - can get their own sheet of paper
  
  • Highlight milestones as you get closer to accomplishing your goals
    
• You can do this with my net worth, my goals sheet in its entirety, and my retirement savings goals
  

Scott’s “Goal Night Ritual”

• Night at end of year, bottle of wine, goals sheet
  
• Do reflection of current year - What did we accomplish vs not accomplish on our goals sheet
  
• Set goals for the next year.
  

Goal sheet should be visible every single day - near where you work.  In your office so you see it every day and you know what’s driving you to do what you’re doing

• Highlight your accomplishments as they happen
  

Websites mentioned during the podcast:

Headline: Here’s how much money Americans in their 50s have in their 401(k)s

Episode 12: Why You Should FIRE Your Financial Advisor | Money Saving Life Hacks

In this episode we will be discussing why we think most people should FIRE their financial advisors.

Why do we say to fire your financial advisor?

Well, oftentimes financial advisors are holding you back from achieving financial success faster.

What do we mean by this?

• Financial advisors typically charge anywhere from 1-2% of AUM (Assets under management) to have you as a client.
  
• In addition to the AUM fee you’re paying with your advisor - you also have to pay “hidden” fees for the investments they put you in.  Sometimes the advisors get a kick back from the funds they recommend or put their clients in.
  
• What do we mean by this?
  
• If they put you in a mutual fund, that fund could charge an annual expense ratio anywhere from 0 to 1% or more.
  
• They could be using front end load or back end load mutual funds
  

Explanation on front end and back end load mutual funds

• Front end load mutual funds are mutual funds that charge a fee upon investing in them.
  
• Back end load mutual funds are mutual funds that charge a fee upon redeeming or selling the mutual fund.
  
• Selling point is that they will have LESS ongoing fees than a traditional fund that may charge 1% or so.
  
• Obviously we know at D&H - that you can buy no-load mutual funds/etf’s with no or extremely low fees.
  
• AVOID front end/back end load funds that some advisors recommend
  
• This can be a HUGE drag on your overall investment success.
  

What should you do instead of hiring a financial advisor?

• Invest in broadly diversified low cost ETF’s and mutual funds.
  
• We have a full episode of some of our favorites- check out episode 005
  

If you do want to have an advisor:

Make sure to hire someone who is held to the fiduciary standard AND who is FEE only

What is a fiduciary?

• Someone who is bound by law to put your interests ahead of their own interests
  
• One would think anyone giving investment
  

Who is a fiduciary:

• Any investment advisor who is registered with the SEC (Securities and Exchange Commission)
  

Who does not have to be a fiduciary?

• Insurance agents, stock brokers, and broker dealers - They only have to adhere to the “suitability standard” - which lacks teeth
  

Two types of financial planners: Fee only and Fee Based

Fee Based financial planners - Charge you a fee based upon assets under management.  As your portfolio grows, so does the raw dollar amount that they’re being paid for their services.

• This fee can often get out of control as you accumulate a large sum of money.
  
• $2m portfolio becomes 20k in fees at 1% and 40k in fees at 2%

Websites mentioned on the podcast:

Headline: How to invest money based on advice from Warren Buffet

How to find a fee only financial planner:  www.NAPFA.com

Clark howard credit freeze guide: https://clark.com/credit/credit-freeze-and-thaw-guide/

Episode 11: What can 4% do for you? | The 4% rule 

On this show the guys discuss the 4% rule and what it means as it relates to your retirement planning.

Websites mentioned on the podcast:

From Fox Business: 5 Student Loan Refinancing mistakes to avoid 

Main Topic - 4% Rule

Introduction to the 4% rule:

• So you have worked hard, saved a bunch of money for retirement.  How can you figure out who much you can spend without spending down all your money?
  
  • Obviously don’t want to spend too little - you earned it after all
    
  • You don’t want to spend too much as you don’t want to deplete it all.
    
  • This where the 4 percent rule comes in…..
    

What is the 4% rule and why is it important?

• The 4% rule is a rule of thumb for retirement spending.  If you spend only 4% of what you have in investment accounts, annually, when you start out in retirement, you will likely never run out of money.
  
  • Add up all of your investment accounts and withdraw 4% in your first year of retirement.  You’re able to adjust for inflation each year.
    
• This rule was created by someone by the name of William Bill Bengen.  Made popular by the Trinity Study from 1998
  
  • Bengen wanted to know how much you could safely withdraw in retirement without ever running out of money.  His final conclusion: you can safely withdraw 4% of your money in year one and increase by the rate of inflation every year.
    
• Assumptions under the 4% rule:
  
  • It assumes you spend exactly 4% in year one and adjust for inflation in future years, so every year you spend more and more.  If you overspend or underspend it can change the likelihood that you run out of money or never run out of money.
    
  • Inflation found here: https://www.usinflationcalculator.com/inflation/current-inflation-rates/
    
  • It applies to a 50/50 portfolio. 50% bonds, 50% stocks.  As you adjust your stock to bond ratio - it can adjust the likelihood that your money will last longer.

Example

Reverse engineering the 4% rule:

Let’s say you’re not in retirement, but you want to use the 4% rule to figure out what your retirement number is.  Let’s say you expect you want to be able to Spend and Give $125,000 annually in retirement.  You expect social security to provide $3,000 per month in retirement.  How much do you need to save in investment accounts to be able to fund your retirement lifestyle?

1. Annualize the social security and subtract it out of your annual spend.  =36,000 per year is being provided by social security, so you will only need 89,000 annually.
   
2. Take your 89,000 / .04 = 2,225,000
   

Now, how can you tell if you’re on track to have 2,225,000?

• Use a compound interest calculator.
  
• Plug in your current investment account balance, annual contribution (plus 3% increase year over year), expected interest rate (we recommend 8.5%), and hit the calculate button.
  
• It will show you how much you’re on track to have when you’re looking to retire.
  

We encourage you to play around with the compound interest calculator to see if you’re on track!

Episode 010: New Car or Net Worth? | How to Buy a Car

In this episode we discussed all things cars. How to buy them,

what percentage of your budget they should be, used versus new, and if you should buy them or lease them.

Websites mentioned during the podcast:

Average new vehicle prices up 2% year over year in July 2020 according to KBB 

Average cost of a new car in 2020 is 20,000

Figure out how much you can spend per month on a car.

Cars as a percentage of your budget:

We believe that cars should not break your budget on a monthly basis.

A car is something that is a depreciating asset- meaning that every single month

the value goes down and should be depreciated on your net worth statement.

Spend no more than 10% of your monthly budget on a car.

This means if your household income is 120,000 per year

you bring home 10,000/month - don’t spend more than $1,000 per month on your car.

This is not a hard and fast rule.  Some of you may want to spend

even less on a care and increase your savings.

That’s OK and we encourage that!  This is just a rule of thumb that we live by.

How to buy a car:

Figure out how much you can spend per month on a car.  Make a monthly budget and feel good about it. - Use a calculator

Edmunds calculator is great for calculating how much to spend on a car.

Equate that to a sticker price.  By using the calculator

Secure financing at a credit union or bank (shop for the best possible rate between banks)

Narrow down your search to 3-4 brands you like in the class vehicle you like that you can afford.  Test drive the cars.

Check consumer reports for reliability - finalize your choice of car.

Search online for the best deal - negotiate the price of the car FROM HOME.  Make the dealer include all fees - out the door price

Once you finalize a price- get the car checked out by an independent mechanic

Finalize the sale - have everything already agreed to before you go to the dealer to purchase.

Why you should not take out more than a 36 month loan:

Cars are depreciating assets

You could get into a situation where you owe more than the car is worth.

In this situation you would need gap insurance to cover the total loss of a car.

Leasing Cars:

Advantages to leasing a car

You have a new or newer car - all the time.  Every 3 years you turn it in and get a new one.

Less maintenance issues to deal with

Can “afford” a nicer car as you’re essentially just

paying for depreciation rather than interest and principle.

Disadvantages to leasing a car:

Leasing contracts do not change - even after an accident.

So if you get in an accident and the insurance company gives you less than what you owe to the dealership, you’re out that money.

Caps on time and distance.  Only a certain amount of miles and can only keep the car for a set period of time.

No ownership of the car - but still responsible for repairs/always have a car payment

Higher Insurance Rates