Ep 60: Why The Cheapest Investment Option May Not Be The Best

Ep 60: Why The Cheapest Investment Option May Not Be The Best

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The Smart Take:

The purchase price of your car is one factor to consider. But the Total Cost of Ownership — adding in costs for insurance, fuel, maintenance and repairs, as well as the residual value upon sale — is a better way to evaluate financial aspects of a car purchase. In doing so, the cheapest vehicle is often more expensive than initially perceived.

Same too goes for selecting investments. Many solely use the expense ratio to determine what fund to buy. But while the expense ratio is important and easily observable, it does not tell the whole story. In fact, it may tell only a small part.

Listen to Kevin describe total investment costs and related factors to consider when choosing your investments. Having a more complete view will help you make smarter decisions.

Have questions?

Need help making sure your investments and retirement plan are on track? Click to schedule a free 15-minute call with one of True Wealth’s CFP® Professionals.



0:53 – The Election

8:55 – Kevin’s Burrito Story

12:51 – Expense Ratios

17:24 – Securities Lending Revenue

21:16 – Helping A Client Understand This Process

24:49 – How Do You Reach A Conclusion?


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The Host:

Kevin Kroskey – AboutContact


Intro:                                   Welcome to Retire Smarter with Kevin Kroskey. Find answers to your toughest questions and get educated about the financial world. It’s time to retire smarter.

Walter Storholt:               It’s time for another episode of Retire Smarter. I’m Walter Storeholt, alongside Kevin Kroskey precedent and wealth advisor at True Wealth Design, serving you in Northeast, Ohio, and Southwest Florida. You can find us online at truewealthdesign.com. That’s truewealthdesign.com. Kevin, great to be with you today. We are in full disclosure to our listeners recording this on a Thursday morning after the election, so November 5th, bright and early. Things are still undecided. We technically still don’t know who the President of the United States will be in the midterm future. I guess we know who it will be in the near future for the next month or two. That’s still set in stone, but come late January, we still don’t quite know who will be occupying the white house. However, things seem to be leaning in a particular direction. How have you been this week tracking all of the news? I’m guessing you’re a little bit like me. A little bit sleep deprived, trying to stay up late, watching the late votes come in, and that sort of thing.

Kevin Kroskey:                  No, I’m good, I’m good, and I’m happy to be here, but my Fitbit tells me every night I go to sleep about 8:30 or maybe nine o’clock if I get really wild and stay up for the extra 30 minutes. But it’s just how it works. I wake up in the morning, have some coffee, and just see what transpired. But we’ll see how everything plays out here in the next couple of days. Then I’m sure there’s going to be ongoing legal maneuvering for a while, but just a brief redox on some of the things we’ve talked about. We got a lot of questions from clients about concerns about the election going one way or the other, and then its impact on the economy and then the link to the markets and, “Hey, should we do anything?”

We’ve talked about that a lot, but basically, what we had described was you don’t necessarily know what is not only going to happen. Say Biden’s elected, and then they want to do some policies. Well, you don’t know what’s going to get passed just because they have an idea, and you don’t know once they pass that supposing that they do, how that’s really going to go ahead and impact those parts of the economy or those industries or how these companies are going to respond. The linkage is definitely not direct whatsoever. Then when you go another rundown, you don’t know how that’s going to correspond to how investors are going to feel about that and interpret that information. We tend to think in a very linear fashion, and the world is much more complex than that.

The markets are much more complex than that. The message that I’ve been sharing with clients that particularly had these concerns are, look, we can see some volatility here over November and December. It’s certainly possible that things could be very tight, be contested. Hopefully, there’s not any breakout of people fighting in the streets or what have you. Maybe a good thing that Walmart paused on their sales of guns and ammunition for a while, I suppose. But, we have a very tight and what looks to be a contested election in several States more so than what we had in Bush and Gore 20 years ago. The markets have actually gotten less volatile the last couple of days. They’ve actually responded quite positively, both pretty much every day. This week they were up, and they look to be up a good bit today.

They were down a little bit last week, but the mantra was don’t let politics mess up or influence your investing decision or your investing process. This is played out exactly in alignment with that thinking. We did have some clients that candidly we talked through this. I said, financially, I don’t recommend making an investment change. Then we went to the qualitative side, and a couple of them just said, “I’m just going to sleep better at night knowing I have a little bit less money in the stock market and have more money in bonds.” I said, “Look, we talked about the financial side; certainly the qualitative side and the emotional side is important too. I don’t want to be keeping you up at night. Hey, if you want to do that, that’s fine. It’s your money, and you certainly, have the ability to do that.

But we always start with the financial and the more reasoned approach. Then we can talk about more of the feeling side. That’s pretty much how we do everything. We certainly believe in doing math and sticking to process and science, but we’re humans, and we have to be pragmatic at the same time. It’s good to see that pragmatic approach or that reasoned thinking process is playing out. It’s good to see that to date anyway; there hasn’t been any, just any fighting in the streets or anything like that. We’ll see how it plays out, but it looks like probability wise that Trump’s not going to retain the oval office, but the Republicans are going to retain the Senate.

So we will have a divided government, and on the surface, I’d love to think that, “Hey guys, it’s going to make you work together. You’re going to have to work things out, right, Walter? I mean, it sounds good. We’re going to come back together and not have all this bipartisanship,” and what it’s unfortunately-

Walter Storholt:               The utopia we dream about.

Kevin Kroskey:                  Right, if past is prologue, it seems like there’s probably just going to be a lot of stalemates, and then maybe people are going to just try to position for the next election in two years and try to get some power. We’ll see what happens. Again, politics don’t interest me that much, but we at least have to be aware of it because it’s on the minds of our clients. We have to be informed to talk them through times like these.

Walter Storholt:               It was interesting on election night. It just goes to show you that the markets are going to do what the markets do. We were expecting such extreme volatility, and it was interesting. I was watching the betting markets overnight, Kevin. I think that picked up a lot of steam from certain circles and people just watching what, what all these pollsters seem to be way off and what they can predict. What about the betters? I think even the betters proved that they are definitely susceptible to wild swings is it was from very heavily action on Biden, to then when Trump seemed to win Florida, I think I saw numbers up in the 75% range that now Trump was going to win the white house. Then they swung right back the other direction, just another hour or two later back to very heavily favored to Biden.

If you were extrapolating that out to the stock market and trying to time and pick and see which direction things were going, I mean, you’d have been pulling your hair out with these wild swings at that time. That’s just another warning against trying to speculate and trying to time, things like that because it just so rarely works out for folks.

Kevin Kroskey:                  Yeah, no, yeah. It’s not investing; it’s speculating, or it’s gambling. As you said, these betting markets it’s gambling, right? We believe in investing. I had an email from a friend who’s also a client the other day. He sent me an email the other day and said, “Hey, I’m thinking about doing this. I was going to go on Robinhood and try to do some day trading strategies. Do you have any resources for that?” I’m like, “Well, the evidence shows about 80 or 90% of people that do that lose money. The odds aren’t in your favor. The way the trading is today with something called high-frequency trading, the probability is probably even less. Just know that whatever you put in it’s like going to the casino and pulling the slot machine, and you might actually have better odds at the slot machine.

I don’t have any resources for you, but good luck.” He just replied back with a little smiley face emoji. You just have to know what you’re doing and then run the Retire Smarter Podcast. Obviously, everything we’re talking about here from an investment perspective is really investing that serious money to go ahead and produce that income and make sure your money lasts a little bit longer than you do. If you are going to go ahead and speculate, and we have some clients with hobby accounts and things like that, that they’re investing, but they’re doing it in a way that I would say is probably not as prudent as the science-based process that we prescribe too. But it’s, they acknowledged that, hey, they’ve been picking stocks. Maybe they started with her dad when they were a kid.

They’re doing it for all these years. It’s a little bit on the enjoyment side too. It’s not like they’re going out there and day trading or something like that, but I don’t think there’s anything wrong with that. I think the important part is really having that clean perspective about what you’re doing and what it is and what it isn’t. When you go to the casino, and you’re pulling a one-armed bandit, hopefully, you know that that’s not an investment and that’s more on the entertainment.

Walter Storholt:               Well, I’m going to make a loose segue and transition into our main topic of the day. You mentioned the Robinhood app, and by no means am I trying to bash any way of investing, or I think that level of access that some of these new apps provide people to be able to buy stocks and participate in investing and saving in different ways, is largely a good thing. But it is interesting where it seems like we’re always looking for the easiest or the cheapest way to go about it. Like when people think about getting into investing for the first time, you look for the easy way to get into the equation. Is it Robinhood, or maybe it’s another one that offers like where you can buy parts of shares?

If you can’t afford a full share of Amazon, you can buy just a piece of Amazon, a share of a share. We’re always looking for that cheap investment or that cheap way to get our foot in the door. I think that segues a little bit into what you wanted to talk about today, Kevin, and why you may not want to choose the cheapest investment option. I think you’re looking at it at a little bit larger scale in terms of planning for retirement and your life savings and what you’re doing with those funds. But I think the parallels and the ideas certainly go hand in hand.

Kevin Kroskey:                  Yeah. I had a couple of things, and that’s a great segue, Walter. You’re very good at what you do. But I had a couple of things that came up in my world recently. I had a client ask, “Hey, why do you pick this fund versus another fund? This other one seems to be a lot cheaper. Why are you picking this one?” And then also I got a burrito from a food truck last week, and there was this big, beautiful chicken burrito. It was huge. I’m like, “Oh man, how am I going to eat this thing?” My wife looked at me and said, “Well, we know you’re not going to have a problem eating it.” She was right. But as I opened up the chicken burrito, I’m like, I felt like that lady, I think it was the Wendy’s commercial back in the ’80s.

Like, “Where’s the beef? I mean, there was like-

Walter Storholt:               Where’s the chicken?

Kevin Kroskey:                  Where’s the chicken? It was like a pound, maybe a pound and a half of a burrito. There was rice and beans and cheese, and you name it. It was in there. But I had to go through this thing for chicken, and I literally went through and picked out all the chicken, and it probably amounted to about two ounces.

Walter Storholt:               Oh, no.

Kevin Kroskey:                  I’m one of those people like my wife, and I go out to eat. Not that she’s a complainer, but she’s more likely to complain about her meal or a drink than I am. I think it’s that I worked in the service industry growing up. My mom worked in it, so I started busing tables when I was 14, started waiting tables when I was 16, started bartending when I was 18.

It was just how I was, so maybe I have a little bit more empathy. But, when it comes to my chicken and my chicken burrito, I want a good bit of it, and I got two ounces. I went back, and I just asked for my money back and figured out something different for dinner. But it just made me think about this, are you really paying for what you’re getting? Are price and value matching up? If I try to bridge the gap here between my chicken burrito, that really wasn’t a chicken burrito, but just a big burrito with lower-priced ingredients. When we look at the investment side-

Walter Storholt:               The discount burrito.

Kevin Kroskey:                  The discount burrito, right. When you look at the investments, there are different costs that go into the investments. If we harken back, I forget the episodes. I think they were in the 30s, but we did a four-part series on the investing process. We really started big picture. You’re looking at the recipe that we wanted for our investments and then getting down to the ingredients. I can’t recall exactly, but I don’t think we got very deep, if at all, into the ingredient selection. What we’re talking about today is really after we figured out what we want to own, really getting into, well, what investment option, what mutual fund or what have you do, we actually want to go out and select to use as an ingredient in our investment recipe. Expense ratios, those are very easy to find out. You just type in a ticker symbol for any mutual fund or ETF, and you can find that online very clearly.

I’d liken it to an iceberg. Walter, I’ll ask you a question here, but when you think of an iceberg floating in the water, you’ve probably seen these images about the proportion of the iceberg that is above the water relative to the proportion that is below the water.

Walter Storholt:               Right.

Kevin Kroskey:                  Have you seen sort of those?

Walter Storholt:               Yeah. When you see the iceberg above the water, just a tiny bit of what’s really lurking under the water.

Kevin Kroskey:                  You got it. The tip of the iceberg is really exposed above the water, and there’s much, much more mass below the water. The expense ratio is like that. It’s the stuff that’s easily observable. It’s the tip of the iceberg. Maybe it’s more than the tip of the iceberg, but it depends on what’s below the surface.

The expense ratios are certainly a good starting point. There’s very clear evidence that the higher the costs are, it’s correlated to lower investment returns, all else being equal. If you have fund A and fund B and fund A costs 1% and fund B costs one-half percent, and everything else is pretty similar between the two, you would certainly go ahead and choose fund B. That’s straightforward, the tip of the iceberg stuff. Some of the other costs, though, that people aren’t really aware of, I’ll talk about in some of the things that impact it. Trading costs are one. You mentioned this with Robinhood, or even a lot of the custodians now have what they call zero commissions. There are no commissions to buy or sell like a stock or an ETF, and rest assured these companies aren’t doing it just out of the goodness of their heart.

They’re making money in other ways that may not be above the iceberg. If you pay a commission to buy or sell a stock, it’s very explicit. It’s above the water part of the iceberg if you will. But a lot of the companies that engage in the zero-commission trading practices, I think it’s probably good marketing in a sense because, from their standpoint, they can say, “Well, we give you free commissions, but we’ll make money in these other ways that are much less transparent, and they’re going to be below the surface of the water.” I prefer transparency overall, but you see a lot of that happening today. When it comes to these trading costs, again, the explicit ones are the commissions, the buy or sell. All commission costs have really come down quite a lot over the last 20 or 30 years or so.

The other type of trading costs is implicit. This is, again, a little bit more of a gray area, but if you are going ahead and selling something or buying something, there are actually different prices. You have a sell price and a buy price, and there’s a spread cost in between. People that make markets that facilitate the buying and selling of stocks. Again, they don’t do it for free. There’s risk in what they do. The market makers will take a little bit of a spread. The other thing that goes with the implicit costs is if you’re trading in large enough quantities or in a thinly traded security, you can actually move the market. Basically, it’s a liquidity cost. Where if you’re seeking liquidity to go ahead and get out of a position by selling it, the market will provide it to you.

The market maker will help facilitate that, but they’re going to do it at a cost. The more liquidity you need, it’s like going to the bank, and the banks don’t operate for free. They provide liquidity, they’ll lend money, but there’s an interest rate. It’s the same principle, but there are basically these spread costs that happen there or these market impact costs. If I back up again here for a moment, so costs that are above the water on the iceberg expense ratio, any explicit commissions to buy or sell stuff that is below the water, you have implicit costs related to this bid-ask spread, which were really big in February and March of this year when the whole coronavirus came about and market volatility really spiked. If you were looking to buy or sell a position, the spread costs were really, really high.

And then also the market impact costs are basically moving in or out of a position and moving the market. Then once that liquidity is found, the price tends to fall back to where it was before that liquidity seeker entered the market, all else being equal. Helpful just to think about it in terms of the iceberg. Something else that is not necessarily a cost, but something that a lot of funds do. Again, something that most people aren’t aware of, but it can be quite profound, and I would call it better engineering.

The trading costs can be better engineered. I won’t get into the different ways to do that. It gets pretty eggheady. But then the securities lending revenue. Some of the funds that we utilize will go and lend out securities that they own in the fund to people that maybe they’re short-sellers, maybe they are some of those liquidity seekers that I mentioned, and it’s actually cheaper for them to borrow the securities and pay an interest rate rather than go out and buy the securities and expose themselves to some of those costs that we just mentioned as far as the implicit cost of seeking liquidity in the market.

These tend to be like smaller companies, or in foreign markets particularly. It does happen with large us equities, but not nearly as much as some of the smaller, more esoteric asset classes, just because those markets tend to be a little bit less liquid. But the securities lending revenue in just a short order, how it works, the mutual fund will go ahead and lend out, say stock A and stock B, to this other investment firm. The investment firm will actually post collateral in the form of generally U.S. government debt, short term treasury bills, and then the pay in interest rates. The mutual fund really isn’t taking risk and doing it because it’s fully collateralized. If the person that they lent the stock to goes out of business, for example, well, they’re already collateralized.

They have the treasury bills, and so they’re made whole. Some of the funds that we utilize actually have securities lending revenue in excess of the expense ratio. Let me say that again, the securities lending revenue that they will go ahead and receive for the fund will actually be an excess of what the expense ratio and the major cost above the water and the iceberg picture actually is. Again, securities lending revenue, just better engineering … Some of the trading costs can be better engineered as well. These are things that we can control without having to predict what stocks are going to do better or worse, or what have you. We went through, just to recap what we’re doing. There’s one other thing that I want to talk about from a cost perspective, but you look at the expense ratios again, very easily observed above the water trading costs. Any commissions you buy yourself or above water, but things, where you’re moving the market, are these, what they call these bid-ask spread costs.

The difference between the buy price and the sell price, though it’s definitely below the water. The more trading that a mutual fund does, this is usually measured in something called turnover. You can find these sorts of statistics on Morningstar. But the more trading, the more those costs are going to be. That’s something that’s important to know. Then the securities lending revenue, it’s not a cost, but it’s just basically a good way to engineer a fund and lend out securities in a very safe and collateralized way to offset some of the costs. Again, it’s not truly a cost, but I would say it’s something that is below the iceberg. People don’t really know about it. Then the other thing I should mention is like the funds that we use credit 100% of the securities lending revenue back to the fund, so back to the shareholders.

There are several exchange-traded funds that are out there that don’t do that. They may advertise a very low expense ratio, but then another way that they will make money is they’ll engage in securities lending revenue, and then they will just pocket that, they won’t credit to the shareholders. So, different ways to go about doing this and making money. But again, rest assured that none of these companies are doing this for free. It’s important to understand the costs both above and below the water. I mentioned when we first started that I had a client question about, “Hey, why we were picking this fund versus that fund.” I walked him through, just rolled back, pull back the curtains a little bit to walk him through the thinking. I would say this is more of a better-engineered approach as well, but more recently, in the market, smaller companies have been beaten up through COVID. It’s really been the big predominantly us companies that have done better.

As they’ve gotten beat up, they’ve gotten cheaper and arguably more favorably priced. We think that they should provide some good returns and some diversification moving forward. We wanted to buy more of it basically. That was our allocation decision, filtering into our investment process, and determining our investment recipe. But then we had to figure out, well, “Hey, what ingredient do we want to go ahead and fulfill that recipe?” I’ll just give a simple example. There’s a Vanguard small-cap value fund. The one that we chose was actually a small-cap value fund from Dimensional Fund Advisors. If you solely look at the expense ratio, Dimensional Fund Advisors, DFA for short, looks to be seven times more expensive. The small-cap value fund for them is like 0.53%.

And then the Vanguard is 0.07. That was for the admiral share class. You look at that, and this is what the client did. He said, “Hey, this is seven times more expensive. Why don’t we just buy the vanguard one?” And so when I walked him through it, and we’re trying to get exposure to small companies, and also to these value type companies. The way that we do it is we look at, again, this gets a little eggheady, but if we have a true exposure to small companies, and we think small companies are going to provide a premium higher return than the market in general, maybe that’s 1%, maybe it’s 2% who knows. That’s certainly no guarantees, but there’s some science behind it that that should work out over time. If, for example, the DFA fund has a loading towards small companies as we measure this.

Let’s just say it’s 0.8, and it was actually 0.82. The vanguard loading factor was 0.55. If you get one, you have full exposure to it. We’re not going to get there for some other technical reasons. Basically, said another way, the DFA fund was smaller than the Vanguard fund. On the value side of the equation, the Vanguard had a 0.32 loading, where the DFA fund had a 0.46 loading. If I looked at the cost and relative to how much exposure I was getting both on the small-cap space and on the value space where the DFA fund looks seven times more expensive solely on the expense ratio, the Vanguard fund actually ends up being five times more expensive when you consider the cost relative to how much exposure we’re getting both on small end value.

That matters again because we expect that there’s going to be a premium for owning small companies. We expect there’s going to be a premium for owning value companies. If we have a positive return expectation there, and we can get exposure to it cheaper, then we expect the DFA fund to outperform the Vanguard fund. Walter, let me pause because I know I just went down the rabbit hole a little bit there. Let’s bring it back and clarify for our listeners if I sounded too eggheady or was too theoretical.

Walter Storholt:               I started a drinking game on this end of the microphone, where every time you say egg ahead, I take a shot. No, I’m just kidding. I feel like we definitely have some proud egg heads among the listening crowd, Kevin. I know that for a fact. I think they were eating up everything you were talking about over the last couple of minutes, but I’m sure we’ve got some folks that are like, “Okay, I think I get it.” I’m probably in that crowd of there’s all these metrics. You listed so many different metrics. I’m just thinking like a couple of things. One, I’m trying to understand the above the iceberg metrics are the things that a lot of people look at. You guys try to look at the below the surface of the sea, the lower part of the iceberg metrics as well to see what’s the full picture, truly. Not be fooled by what’s just on the surface.

Then takeaway number two is figuring out this idea of, at least for me, like how can you reach a conclusion when you have that many variables, that many things to try and decide. The human brain, trying to analyze all these different things and say, “Okay, this is good. This is bad. This is okay.” To then actually come to a conclusion of, “Yeah, this is a good, good option to go.” It just seems very overwhelming the number of variables and levers that can be pulled in analyzing these decisions.

Kevin Kroskey:                  I think it’s almost just like going on the internet, right? I mean, somebody can go out and read something on the internet. There’s tons of information that’s out there, but really what’s the relevant information? What’s good information? I think we’re a big filter for clients. Oftentimes they’ll read something and have the question, and they’ll rely on us to go ahead and filter that for them and explain to them, “Hey …” Just like we talked about at the beginning, does the election matter for my investment strategy? The short answer is no, but we have to walk them through why that’s the case and what have you and filter through the noise to focus on what really matters. It’s the same sort of thing when it gets into the details. This does get a little bit down in the weeds, but I think it’s just important for people to understand this.

When you look at both of those, Vanguard’s a great mutual fund family. We use both Vanguard and Dimensional Funds heavily in our practice for our client’s money that we manage for them. But you still need to go through this decision making process. Yeah, you want to make sure that the total costs are low. Certainly want to start with the expense ratios. But it really is that total cost approach, and not just on the cost side, but value too. Maybe I can close with another analogy. When you look at buying a car, you can go out, and you can buy the cheapest car that’s out there. Years ago, I think it was probably a Yugo or something. Now you have Kias, and what have you, that came into the market, and they’re definitely on the lower price side.

I’m not saying the Kias aren’t good cars or anything like that. But when you look at the total cost of ownership, what you pay for the car is only one thing. I would say, I would liken that to the expense ratio. But when you look at the total cost of ownership, what are the insurance costs going to be? Some cars are way more expensive to insure than others. Some are more fuel-efficient. It depends on, does that matter based on how much you’re going to drive or your social and environmental preferences. Also, what’s going to be the repair and maintenance bill, both expected as well as unexpected? You have the highline, the BMWs and the Aldi’s of the world are going to be more expensive, to maintain, but you’re probably going to, arguably going to have less maintenance that you’re going to have to do on them because they’re supposed to be better built.

And then when you look at the resale value at the end of the ownership, well, some cars are going to hold their value better than others. I have a Jeep Wrangler. I had them for years. I love them. I mean, they just don’t depreciate that much. There’s a lot of value there that’s on the other side of it when you do go ahead and sell it. It’s really looking at all those factors. We do it for cars. Doing it for the investments is much more difficult, I would say. The expense ratio is an easy place to start. But some of the other things that we talked about definitely are below the water, and it definitely gets into some pretty technical areas. You get car purchase sites like Edmond’s and some others that will really help you walk through a total cost of ownership approach and figure out what’s the best decision for you.

We do the same thing when it comes to a mortgage. Hey, does it make sense to pay for a 30-year interest rate, a higher interest rate when you’re probably going to be in the home for seven years? Probably not. This sort of thinking process, I think, applies to whether you’re buying a chicken burrito, whether you’re buying a car, what kind of mortgage you’re going to use, or what sort of investments that you’re going to use to fulfill your investment recipe. But it’s a similar, I guess, process, even though the data points and what have you are different. The further down you go, it does get more technical and probably more difficult for the novice or even a well, I mean, we have a lot of smart clients that handled their money by themselves for years and did a pretty good job of it.

But I have yet to meet one that really understood some of the more fine-tuned things that we just touched on, on a high-level today, in terms of the training cost, securities, lending revenue, the factor exposure, what have you. They also tend to miss a lot of the tax implications and the tax efficiency on the investments as well. We really enjoy working with smart, successful people, but we do this every day. Even if they have a passion for it, they look at it and say, “Hey, maybe I can read the Wall Street Journal a couple of hours on the weekend or something like that.” I mean, it’s just different than spending your career every single day and getting professionally trained to do this sort of thing. I think that’s where you see some of the differences, but the process really applies to many different aspects of our life.

Walter Storholt:               I think that’s really great to compare it to car shopping because all it is is lots of different data points and making, and you’re weighing each little data point too. Like, all right, how important are the cup holders? How important is the size of the vehicle? Okay, I got this safety ranking; just because it was lower than this vehicle doesn’t necessarily mean that the other one’s going to be the winner because I may value that piece of the equation a little bit lower. I imagine you’re also doing the same thing. Not all of the data points are equal in your minds. You’re placing different values to certain ones because of, I don’t know, it could be the time of the year. It could be how close we are to an election, what the markets have done recently. I’m sure there are lots of other factors that go into it that help you weight that, or maybe how the client feels about risk or about certain elements. There are still some little subjective things that then help you fine-tune and tweak those things, as well, it sounds like.

Kevin Kroskey:                  Completely. I guess one other thing that you just triggered in my brain, so we, I apologize to those that are very environmentally friendly, but for the Kroskey household, our car purchases, I mean we have big SUVs. We have a big family, we’ve got big dogs. But also when you look at the different safety ratings, and this is one thing where you look at the data, but looking at something and interpreting something are two different things. It’s like a radiologist looking at a film, and you can have two different radiologists interpret the film differently. One could be right, and one could be wrong. You really need that wisdom and expertise to know how to interpret the information to figure out what really matters.

But when I looked at the car safety data, and you get these different vehicles that they have a better car safety record than the SUVs. But one thing that is completely omitted from those figures is if you have a little, let’s just say a Toyota Prius crashing into our big behemoth SUV, and they’re both going at the same rate. Well, who do you think is going to win that, Walter?

Walter Storholt:               Yeah, I’d like to be in the SUV in that equation.

Kevin Kroskey:                  Yeah. Nobody wants to get in an accident, but the mass of the vehicle, it’s Newton’s law of physics.

Walter Storholt:               We don’t need a subjective opinion on that battle, right?

Kevin Kroskey:                  No, you don’t, but it’s not in the data. And so I looked at this. I’m like, “This just doesn’t make sense.” We’re spending a lot of time in Florida, and I think there’s plenty of terrible drivers that are down here. We have some young kids, and we just want to protect ourselves. Candidly, I look at it as a bit of an insurance policy. Yeah, it cost me more in gas. Yes, it’s a little bit less environmentally friendly, but for us and for our values, we want to prioritize the safety of our family first.

Walter Storholt:               That’s one of the trade-offs. One of the subjective pieces that need to be taken into the equation. Just like the amount of chicken in your burrito. There are some people that would have been okay with that amount. That was not pleasing to you, and you demanded that to be righted, so I love it. You’re going to have to find a new burrito spot, though it sounds like,

Kevin Kroskey:                  Yes. Yeah, I’m not going back there for sure.

Walter Storholt:               Very good. Well, I really loved the breakdown on the show today, Kevin. It was interesting to see all those different data points that truly exists under the water. The true size of the iceberg when it comes to evaluating investments, and why the cheapest investment option, just like the cheapest piece of clothing, the cheapest car, and many, many other examples we can talk about, isn’t always the best option to go with, and certainly back to the very beginning, the cheapest burrito either. If you have maybe planned your financial life that way a little bit, or your investing life. You’ve looked for the cheap investments as a way to get through. Or maybe you are just having some questions about what we talked about today and want to talk a little bit more in-depth about what you can do in your financial plan as you think about the future.

It’s easy to get in touch with Kevin and talk these things out. He’s got a great team, of course, at True Wealth Design serving you in Northeast Ohio and Southwest Florida. Here’s how to get in touch if you’ve got any questions. 855- TWD-PLAN. That’s (855) 893-7526, or you can go to truewealthdesign.com and click on the “Are We Right For You” button to schedule your 15-minute call with an experienced financial advisor on the True Wealth team to get the process started. Kevin, thanks for the guidance and walking us through all this on the show today, and for the stories as well. We were entertained by the burrito story. That was good stuff. We’ll look forward to another episode with you soon.

Kevin Kroskey:                  All right. I appreciate it, Walter. Thank you.

Walter Storholt:               All right. Take care. That’s Kevin Kroskey. I’m Walter Storeholt. Thanks for joining us. We’ll talk to you next time, right back here on Retire smarter.

Disclaimer:                         Information provided is for informational purposes only and does not constitute investment tax or legal advice. Information is obtained from sources that are deemed to be reliable, but they’re accurateness and completeness cannot be guaranteed. All performance reference is historical and not an indication of future results. Benchmark indices are hypothetical and do not include any investment fees.