RAIRA-Show-EDU-Y26E04

The Retirement and IRA Show emphasizes that their information is not investment advice and should be consulted with a financial advisor. They discuss handling investment assets and retirement planning, focusing on asset positioning and asset liability matching. The hosts address the importance of managing a distribution portfolio in retirement, highlighting the difference between accumulating wealth and sustaining it during retirement. They use hiking as a metaphor to explain the challenges of navigating spending volatility and investment uncertainty in retirement planning. The show also touches on personal experiences and weather updates, with plans to continue discussing investments and retirement planning in future episodes. The retirement and IRA show represents the words and views of the show hosts exclusively and should not be construed as investment, legal or tax advice. All information is believed to be from reliable sources, however we make no representation as to its completeness or accuracy. All economic and performance information is historical in nature and is not indicative of any future results. Any indices mentioned on the show are unmanaged and cannot be invested indirectly. Diversification and asset allocation strategies do not assure profit or protect against loss. Never make any investment or financial decisions based on information offered on this show without first consulting your financial, legal or tax advisor. Financial Planning Services offered through Jim Saulnier and Associates LLC, a registered investment advisor. This is the Retirement and IRA Show coming to you from beautiful Northern Colorado. Join us as Certified Financial Planner Jim Saulnier as well as Colorado State University Finance Instructor and Certified Financial Planner Chris Stein teach you about IRAs, borrowing case, annuities, social security, pension plans, and estate planning in a fun and enjoyable show. Whether you are listening live in Colorado or streaming from their website or iTunes podcast, Jim and Chris want you to know that they are available to help you plan for your retirement. Just visit their website at www.jimhealth.com, that's www.jimhealth.com, and click the Meet the Team button on the homepage. Now here's Jim and Chris with today's show. Hello everybody and welcome to the Retirement and IRA Show EDU edition for this week. We're going to continue our discussion this week with Jacob from our office who was on last week as well. We, Jim and I, decided that we would be intentional in the first quarter here in 2026 and talk a bit more than we have in the past about our investing philosophy and kind of how we approach handling the investment assets for our clients and how that kind of integrates with our retirement planning approach, concepts like asset positioning and which is a form of asset liability matching, if you will, and kind of some of the specific positions that we use for what purpose. In other words, we pay a lot of attention to what dollars that you have need to be used for what purpose and when during your retirement and let those needs drive where we place those assets or assist clients with placing those assets. And so Jacob was on last week and started getting into that based on a few, we're kind of using the structure of a Q&A approach where we've got some emails from clients that have come in asking us about these things. And we got up to one, we had I think three last week, I don't think we got to this number two and number three, plus since last week's show we've had a few people reach out with questions based on what was talked about in our previous EDU show. So we're not going to do, you know, 30 back-to-back episodes on this topic on the EDU show, but we are going to kind of sprinkle throughout the first quarter at least, maybe into the second quarter of 2026, occasional recurring visits from Jacob and to talk about these particular things based on your feedback and what we hear from you with questions, etc. So I'll invite Jacob and Jim back in. Jim is joining us from the tropical state of Ohio right now. I will share with you things have turned warmer here, and that's probably headed east your direction. We're up in the 40s I think now, nice and sunny, snow's melting off, and we've gotten out of the refrigerator, the icebox that we had over this past weekend. And Jacob's here with me in the warming of Colorado, I guess. So how are you two? Do you want to go first, Jacob, or are you going to hold it for the older guy? I'll defer to you. Age before beauty, as they say. Age before beauty, for sure. Yes, I'm still in the icebox of Ohio. Just to give you an idea, Chris, two this morning, 22 right now, zero tomorrow as a low, 17 as a high, negative 1 as a low on Thursday, 18 as a high, 1 on Friday, 15 as a high, negative 5 on Saturday with 13 as a high. So this cold snap is not going away here in the Midwest. Back east, yeah. Here we had a glancing blow and dealt with it for a few days, but it's definitely moved on. By next weekend here, it's supposed to be almost 60 degrees. I know, I saw that. I watched the news. I still get it for three months on YouTube TV until it warns me that if I don't play my phone from an IP address in Colorado, I won't be able to get my Colorado stations anymore. But I shall be home to Colorado with two weeks to spare to be able to do that. Yes. But anyways, no, I watched. And yeah, it's over. What cold you saw when the Patriots somehow pulled out a miraculous win. And I think we bet a year's worth of lunches. So you have to go back and hear the recording. That's a little different. No, no, no, no, no, no. You don't have to go back. Trust me. You said whoever wins buys the other lunch every day for a year. So you owe me 365 lunches. And that was before I was on, Chris. So that's just between you and Jim. Well, thanks for clarifying, Jacob. You're a lot of help. Thanks for throwing your second in command under the boat, Jacob. No, Chris and I are both sharing the same level of despair after seeing the Broncos win. No, I made the mistake of getting my hopes up. I told myself, you know, we're playing with house money. It doesn't really matter. You know, nobody expects anybody else to win with a backup, etc. Then things were looking pretty good until Mother Nature decided to wreak havoc on everyone's lives. That can happen. And things rapidly deteriorated from there, for those of you who watched the game, I'm sure you saw. Well, not only was it Mother Nature, I don't know why Sean Payton didn't kick the field goal and he went for it on fourth. And that's what turned the game right there when we stopped you. And anyway, I don't know how the Patriots pulled that out. We are a horrible team. We're going to, I think, personally get a Heine handed to us by Seattle. But it'll be interesting to watch the Super Bowl with the Pats in it again somehow. Lord only knows how. Don't expect us to be reoccurring, folks. It'll be kind of nostalgic. Yeah. Except we won't have Brady and Belichick. But it'll be interesting to see. Anyways, folks, this is the Retirement and Higher Ratio Q&A edition. No, EDU edition. There you go. EDU. I got it. And I am broadcasting live from Balmy, Ohio. And I will be in Florida just in time to experience cold down there, Chris. One of the days, which day, I think it's Sunday, it's going to be a low of 39 and a high of 49. I mean, that's, for Florida, especially central, south-central Florida, that's frickin' cold. Sunday, 37 is a low, 47 is a high. That's like winter for them. So not quite sure I'll be able to go to the beach in that weather. The beach is wicked, relatively wicked cold when it's that cold because you get the wind. But anyways, I will be in Florida, semi-sunny Florida for two weeks and two days, then returning to Colorado for a couple of weeks. So that's my travels. We are going to bring Jacob back on the show. My intent for the first quarter of 2026 might bleed into the second quarter, maybe right up to National Annuity Awareness Month, which is when, Chris? That would be in June. In June, correct. Every June, we dedicate to National Annuity Awareness Month. But I wanted to expand our discussion on investments, more so to the tune of how we look at managing a distribution portfolio. Cash key, folks. All of you DIYers, and most of you listening to this are DIYers, you guys were great at accumulating assets. You truly were. You amassed hundreds of thousands, most of you millions. And you did it by disciplined investing, keeping your fees low. Hopefully you kept your fees low if you were working with someone and not paying the uncapped 1% or Lord only knows 1, 1 1⁄2, 1 1⁄4, whatever they charge, AUM. But you did it by keeping your fees low, most likely passive investing, most likely indexing, and you grew wealth. But the same strategy that took you to retirement is not going to take you through retirement. And in all honesty, the best metaphor I have is hiking. We all know I love to hike. Most injuries when hiking, and I am not a mountaineer, but most injuries mountaineering is climbing down the mountain, not up. Most injuries when hiking, when you're hiking down, I wouldn't necessarily say a mountain, it's more like a big hill here in Colorado, I'm not a mountaineer, highest I've ever been is like 12,800 feet. I guess that's technically a mountain, not a hill. And hiking down the mountain causes more injuries and more stress on my knees than hiking up. And the same thing in mountaineering and the same thing in distribution retirement planning, amassing your assets, when the only cash flow in to your savings for retirement is positive cash flows. You keep putting money in, you're not debiting, there's no negative cash flows, you're putting money in. Investing in that situation with low fees, passive index, positive cash flows is easy, truly is. Distribution planning, taking money out, navigating spending volatility, investment volatility, investment uncertainty, all of that is more difficult. And when I say we want to talk more about investments, we're not going to turn this into a stock jock show, we never have, never will. When I was first broadcasting on KFK, no, don't tell me, KFKA, right Chris, KFKA, we're on KFKA? Yes. Way back in the day. Way back in the day, KFKA, King of Farming, King of Agriculture, that's what it stood for. And aren't they the oldest radio station east of the Mississippi? Well they're far west of the Mississippi, so... Ah, true, I was testing you, I was testing you, very good, you picked up on it. They weren't the first west, but they're the longest continuous operating station west of the Mississippi, I believe is the statistic. Yeah, they have some claim to fame here in Colorado, folks. Anyways, way back in the day when we were on KFKA, I told them we're not going to make this a stock jock show. We're going to talk about retirement, we're going to talk about IRAs, we're going to talk about Social Security, pensions, annuities, fund number, and investments, but not as a stock jock. We're not going to become that Kramer dude on the radio or on the podcast screaming, buy this, buy that. And that's not what my intent is over the next quarter to five month period. When we bring Jacob on and when we start talking investing, I want to wrap it in a distribution portfolio concept. Okay, long intro, but I want everybody to understand what our intent is. Jacob, do you want to say hi to everybody and welcome everybody before I jump into what we're going to talk about today, which pretty much directly ties into what we talked about last week. Sure, yeah. I'll just jump in and say hello. Happy to be back and looking forward to picking up where we left off last week. That was quick. You see how he did that, Chris, to the point? He's catching up off the old block, my block. It brings a tear to my eye bringing you on your own. I think Chris said that I was rivaling you for word count last week, Jim, so I got to dial it way back. That's for sure. Last week was, yeah. Really? So, he beat me. Excellent. I think so. So, you count the words, Chris? You have software that counts who speaks the most? No, I just go by gut. I just felt dominated by Jacob. Okay, so the reason I brought Jacob back on, it was twofold. We originally wanted to, or I originally wanted to get through three emails. I think last week we got through one because it morphed into a discussion on buffered ETFs and cash-like holdings and how we do that with positioning. Go back and listen to the podcast if you didn't hear it, or if you did but you forgot what we said, go back and listen to it again. And we received a nice email in response to that, and I think there's enough here, guys, that we can probably concentrate on this one email and go down several rabbit holes. But if we do accomplish all of this and there's still time in the day, and there may not be, but Jacob has a pretty hard break, we'll go into some of the other emails that we received. If any of what we're talking about interests you, Chris will share later how to send us an email. But just put in the subject line, maybe investment focus or something to that effect, because, again, I intend to try to dedicate a good number of shows to this topic because it's one that we don't talk about much. And I think it's crucially important because it is so difficult, and all too often in my industry, my quote-unquote advisors are guiding retirees through retirement with the same portfolio and the same concepts and the same investment strategy that they did in an accumulation. They just marry it with a 4% safe withdrawal rate and then program their software to project using Monte Carlo and then spitting out some silly probability statistic. It allows them to have one big-ass portfolio and manage it exactly like they did during the accumulation phase, maybe build in a little bit of a cash cushion for a sequence of return risk. But there's so much more to managing a retirement portfolio than that, and that's what we hope to get to. Okay, so with that, Jacob, you haven't seen this email, so I'll read through it, but there's a lot that you can add to this, I'm certain. And Chris is, by all means, chime in whenever you feel there's something you want to add. So it says, Hi, Jim. For the past few months, I have been trying to learn more about buffered ETFs, including an understanding of their inner workings, the pros, the cons, and their risks. I have also wanted to learn how they might perform during a significant market downturn. And, Jacob, I just want to give you a heads up. Can you go to the website of one of our 100% buffer ETF providers so you can address a question I'm going to ask? Let's tie it to maybe the tariff tantrum of last year so you can address, because I think we hit almost a 25%, not quite 25. It might have been like a 21%, 22% drop. It's worse during the tariff tantrum. So, anyways, I'll continue with this. I just wanted to give you a heads up so you can open it. Okay. I've also been wanting to learn how they might perform during a significant stock market downturn, say when the S&P is down 25%, 35%, or 50%. Let me pause there, listeners. He's referencing the S&P, which would be called in the parlance of these buffered products, the quote-unquote reference asset. It is the asset that these buffered ETFs attempt to link their performance to. So they're called a reference asset. It does not have to be the S&P. The vast majority are the S&P 500, but there are some that also tie it to the Russell 2000, to the NASDAQ 100, and to that Morgan's, what is the MSEESIA, whatever it is, Chris. You said it once what it stood for. Chris will look that up real quickly. So those are called reference assets, folks. Just because this gentleman is tying it to the S&P, you may see some buffered products tied to different reference assets. Okay. Did you find what that stood for, Chris? Oh, yeah. I know what it is. MSCI is Morgan Stanley Capital International. That's why you see MSCI kind of attached as a title to lots of various international indexes. Perfect. Okay. In your recent Retirement in IRA podcast, episode 2603, that played on January 21st, 2026, it included a detailed discussion about 100% buffered ETFs, which I found very interesting. I don't know if he found the discussion interesting or the 100% buffered ETFs interesting, but he found something interesting. Several times you guys commented how this type of ETF could be viewed similar to cash inside an investment allocation. Jacob, pause there and clear the air here, because I know we might have called it cash-like. Describe the difference between cash and cash-like and how we position a 100% buffer as cash-like. Yep, yep. I think it's just a little tweak of the language there, where it is we do consider the 100% buffered ETF under that cash-like umbrella. Cash, if you could follow my air quotes, I know you can't see me, but cash, on the other hand, in our eyes, would be money listeners that we anticipate you needing for spending, let's just say, this year. It could even be as early as next year, but I'm going to focus on 2026 in my example. So if you're entering this accumulation positioning stage or you're already there and you're looking at setting aside money that you know you're going to need to distribute from the portfolio to cover some of those spending needs, let's just say this year, 2026, those dollars would fall under the cash umbrella. And in our eyes, what that traditionally means is funds like the ones you've heard us talk about in the past, being kind of the zero-to-three-month treasury bill funds. There are some ETFs out there that invest in rolling zero-to-three-month treasury bills, ultra-short-term government debt that function very similarly to your typical money market style of fund. A money market style of fund as well, or on the topic of that, that would fall under the umbrella of a cash style of holding. Those are holdings, listeners, that are really prioritizing the liquidity, the ability to sell out of them and access money that you know you're going to need in this specific year. We wouldn't necessarily earmark the 100% buffer for spending that we know is going to be needed this year in my example. The 100% buffer would fall under kind of the concept of the cash-like style of assets, where it might not be earmarked for spending this year, but maybe years in the future, whether it's one year down the line, two years down the line, three years down the line, maybe even four years down the line. Those are dollars that, from a positioning standpoint and a risk capacity standpoint, based on when we anticipate that money to be needed, we would prioritize allocating those dollars in full principal protection, as you've heard us talk about in the past. And so the 100% buffer ETF is just a tool in the tool chest to consider for some of those dollars that you know are going to be needed in the near future, maybe not this year, but maybe in the next one or two, three, four years down the line, where you're really allocating them, prioritizing that full kind of principal protection. So that's the big kind of difference between the cash style of dollars, which would be more the money market, short-term treasury bill, kind of liquid funds that we would earmark, versus the cash-like dollars that are two, three, four years down the line, where you could consider things like the 100% buffer ETF. You could consider things like brokered CDs. You could consider some of those defined maturity bond ETFs that we've talked about in the past, MIGAs. There's all sorts of options out there for that kind of full principal protection two, three, four years down the line. But that's the biggest differentiation and point that we wanted to kind of clarify with this listener's question specifically. Thank you, Jacob. Anything you want to add, Chris? No, I don't think so. Just a happy listener myself right now. So the listener here continues with his email. I, meaning him, not me, I continued researching and reading on my own. I zeroed in, and I'm not going to name the specific fund. I'll name the fund family. He went to BlackRock, folks. So I zeroed in on BlackRock, and he found a 100% buffered ETF at BlackRock. He said, this ETF has a net expense ratio of 50 basis points. Perhaps this is even the ones you referred to on your podcast episode as some of the cheapest you've found. 50 basis points is the cheapest we have found for a 100% buffered ETF. I'm hoping they drop even more than that. We found a 25 basis point offering from a new company, well, old company, new product. I won't name them. And that one only has a 10% or might it be in the 50s, either 10% or a 15% buffer. But their annual fee is 25 basis points. That should hopefully go a long way to hopefully forcing fees down across the board. That's probably one of the biggest negatives of these buffered products. They have relative to a passive index, all you VGers, all you Vanguard people. You might be saying, oh, my God, even 25 basis points, Jim, that's crazy. I can get a fund at Vanguard for .03 or something like that. I'm making that number up, but very, very low. Yes, passive investing is a hell of a lot cheaper than these buffered products without a doubt. I do think competition is going to continue to drive costs lower on these products. So 25 bits is the lowest I found, but that's for a relatively newcomer. And it was either a 10% or a 15% buffer. They gave strong hinting. I listened to a presentation of the CEO of this firm who was asked if they would offer additional levels of buffer protection. He must have talked to his compliance department at first. He wouldn't give a solid answer, but he hinted strongly that, yes, they will be coming out with additional. And I've got my fingers crossed that a 100% buffer from this firm will also come out because if they mimic 25 basis points, that's starting to get at a level where they're getting very attractive. But he is correct. 50 basis points right now is the cheapest we have found for a 100% buffered product. OK. He does continue. Based upon my reading of the July 2024 news release from BlackRock linked to this ETF, he mentions this 100% buffer ETF. And based on the fund's perspective, I have a few questions. He says, I will put them below in bold. And he did, folks. He has three questions in bold and some thoughts around them. OK. Heard the disclosure at the bottom of BlackRock's website. Again, referencing their buffered ETF product. He said, I found the following. And he quotes directly from BlackRock's website. Quote, there can be no guarantee that the fund will be successful in its investment strategy to provide downside protection against underlying ETF losses. End quote. Then he starts another line. I'm not sure if it's the same quote or a new quote. Quote, the fund does not provide principal protection. End quote. And then his third line, quote, an investment in ETFs, not this particular ETF, but this is a more generalized ETF. An investment in ETFs is not equivalent to and could involve significant risks not associated with investments in cash. Notice BlackRock didn't say cash light. It said cash. It's a nuanced difference. But there is a difference between cash and cash light. Everything that he wrote makes perfect sense. So he asks, and this is in bold, folks. With these quotes in mind, how are you comfortable categorizing these 100% buffered ETFs as cash light? And the disclosures above refer to, quote, unquote, significant risks. That's a good question. And it's one that I feel and still feel perfectly comfortable with. Because what he's referencing in getting is legal ease. He's not referencing or let me put it differently. No attorney that represents anything, no corporate attorney that represents anything in investing for any, whether it's cash or cash light investment or bond fund or stock based fund, is not going to have language like that. You have to understand and not to confuse legal description and investment description. So I said to myself, how can I explain it to this person? Well, I think Jacob did an excellent job explaining cash and cash light. And we do consider this to be a cash light holding. For those who don't understand how these funds work, we're not going to get into it on this podcast. Go back and look. We talked about these at length. I don't know when, Chris, maybe you remember. Or you can give them approximate dates if you could find it. And we had a gentleman from one of the providers, Kalamos, come on. I don't remember his name. I'm sure Chris will. And he spoke at length about the 100% buffered products and how they work. Go back and listen to that podcast to get an idea of how they work. What I do want to call out, though, is that in order to get, and the gentleman from Kalamos made this explicitly known, to get the 100% protection net of the fee. And, Jacob, be prepared to explain in a second what I mean by that. To get the 100% principal protection net of the fee, you have to hold it for the full outcome period. You have to buy it or at least own it on the initial outcome day. And 365 days later, because it's a one-year hold, you still have to hold it. The protection of the options only pays out once a year at maturity, the end of the 12-month outcome period. Chris, did you find by any chance when the gentleman from Kalamos came on? I'm looking. It's Matt Kaufman is his name, and I'm looking to see if I can track down the date on the episode. So I haven't quite done it yet, but I'm working on it. Okay. Jacob, can you explain what I just meant? And I know we made this perfectly clear on the show as well. And this gentleman in his next question acknowledges it. But for our listeners who might be new, what I meant when I said you'll get 100% principal protection net of the fee. Yep. Yep, absolutely. So the fee of these funds themselves, like Jim mentioned, and I'll use 50 basis points or half a percent in my example since that's what the listener mentioned as well. On the day that you buy this fund, they will give you a net of fee cap rate on the upside, which is your maximum ability to participate on the upside over the course of that 12 months. But the fee will also apply to the downside as well. So in an easy example, listeners, let's just pretend you bought this fund at the start of the month and you held it for the full 12-month period. And let's say we got to that last day of the 12 months, the full 12-month period, the point-to-point term that you held this fund. Let's pretend the S&P, since we're picking on that as the underlying asset, let's pretend the S&P was down 25% in this specific example. You're sitting there at home. You're thinking on paper, hey, that's great. I've got the 100% buffer. I'm protected from that full 25% loss in that example. Well, if you logged into your custodian, wherever it may be, and you looked at the actual value of your fund itself, you would see that it is going to be down the fee of the fund itself. Because the provider, whether it's Calamos, BlackRock, any other providers of these buffered ETFs, they're going to take out that annual expense ratio throughout that 12-month period regardless of what the market is doing. That's unavoidable. That's the cost of the fund, just like any of you VGers that are paying 10 dips, 7 dips on some of these passive index funds. This half a percent fee, that's the same style of fund. That's going to come out over the course of that 12-month period regardless. So in my example, just to kind of finish it up on the downside, that listener who sees, okay, market's down 25. I should be down nothing. I've got the full buffer. They will be down a half a percent for that 12-month period because the fee of the fund itself is taking out as well. And that applies to the upside on the cap rate on the upside as well, where even if the market is up, you do have to factor in that half a basis point fee in this example on the upside as well. So very quick, I won't get too tuned in the weeds here, but bear with me. Let's say that the next cap rate this person locked in on the upside when they bought the fund for the 12 months, let's pretend it was 7% just to make it easy. You get to the end of that 12-month period. This listener would need the market to finish at 7.5% or higher for that 50 basis point, that half a percent fee to get taken out for them to net that full 7% net of fee cap rate that I mentioned. Perhaps one more example just to kind of further illustrate that. What if the market is relatively flat? Let's pretend that the S&P is up 4% over the course of that 12-month period. Well, you will see at the end of that 12 months, 4% is under your 7% net cap rate, but when they take that fee out, that listener in this example would walk away with about 3.5% versus the 4 that the market returned. So you always have to factor in that half a percent fee over the course of the 12-month period on any of these buffered ETFs. It kind of applies similarly. Thank you, Jacob. Chris, did you find when Matt was on? Yes, I did. So originally we've had him on a couple times. The original show was EDU show number 2430 on July 24th of 2024. We had him back then a year later. Well, we had him back a few weeks later on a Q&A show answering some questions, and then we had him back this past summer on July 30th to talk about it, to address some industry critiques of the product. We wanted to talk about those because there were a number of people in the industry kind of talking about them, and some more or less favorably. That was EDU show number 2531. So the original discussion where we get into all the details of how they work, what they do, what they don't do, risks, benefits, all that good stuff was EDU show number 2430 back released on July 24th of 2024. Okay. And, Jacob, I went, ooh, when Chris said July 24th, 2024, why did I go? That's chocolate cake day. Chocolate cake and white frost and white frosting day. Can't forget the white frosting. Yeah, it's not just chocolate cake day, Jacob. It's chocolate cake and white frosting day. Would never make that mistake in reality. No, when I'm like 86, 87, well, according to my stroke, I'm not going to live past 87, but when I'm old and in a nursing home and you're coming on July 24th to visit me, my one annual visit, I expect chocolate cake and white frosting. Will do. All right. Okay. Back to this. You have to understand, listener, cash like, it's a portfolio role description. It's not a legal promise. So all of this disclosure language, you have to understand, is written for what could go wrong. It's not written for what the fund is designed to do. It's written to describe what could go wrong. So what I wanted to do is prove to you or show you that we could take what is legitimately considered a cash holding, not a cash like holding, but a cash holding. Cash holding could be a money market. Many people will consider it money market. Now, some people will consider cash to only be an FDIC-insured bank deposit or government T-bills. T-bills, for those who don't know, are short-term U.S. government debt, which is still, even at $38 trillion in debt, still considered the gold standard for security and safety. It is debt that the U.S. government issues and matures in one to three months. So some people, some purists, will say that that is the only, those two, are the only cash. Everything else is cash like. There's a lot of other people, though, who will say a money market account is cash. You could fall on either side of that spectrum. I don't care. What I wanted to do is I went and got the summary prospectus for two Vanguard funds. This is not a shout-out to run out and buy these funds. This is for illustrative purposes only. This isn't investment advice. I'm trying to make a point. So I got the Vanguard Prime money market fund summary prospectus, which is the shorter version, was easier to review, and then I got the massive 80 or 90, I forget how many, but it was either 80 or 90-plus page prospectus for all Vanguard money market funds. And here's some of the language in a money market fund just to show you, listener. I have to scroll to it. I'm sorry. I didn't have it open. I was all set, and I didn't have it. Okay. And I will reference the page, Vanguard Prime money market summary prospectus, page 8 of 12 from 2025. There can be no assurance that the fund will be successful in maintaining a stable net asset value. Same prospectus, page 9 of 12. You could lose money by investing in the fund. Same prospectus, page 8 of 12. As with any investment, an investment in the fund could lose money over any time period. Referencing the 85-page full prospectus for all Vanguard money market funds, not just the summary for their prime money market fund, page 38 of 85. The value of shares of the fund may go up or down, and investors may not get back the amount invested. This is from money market funds listener. I don't think you would say to me or to anyone, how could you call a money market fund cash-like with language like that? That's the same way I can call these 100% buffered products cash-like with language like that. Again, the cash-like or the investment mandate or philosophy is what the fund is trying to do, but the language in these disclosures, because we are a litigious society, they have to have language like that. I hope that explains it. I'm not trying to say this is tit-for-tat. I'm not trying to say that this is a scam. I hope that explains it. I'm not trying to say this is tit-for-tat. But if you understand how it works, yes, we do consider these cash-like. But just like a money market fund can break the buck, and they did in 08, if you remember, the prime money market, not Vanguard's, but it was called the prime money market fund, did break the buck and caused huge issues in the money market world. You can lose even in them. So this gentleman, hopefully that answers his question. But that's how I can do it. Yes, how I can do it, that's how. It's just the language that they have to have. But then he continues. What does that mean in English? The reference asset is the S&P 500. BlackRock discloses that they do the fair hedging. The reference asset is the S&P 500. BlackRock discloses that they do the fair hedging. The reference asset is the S&P 500. They do the fair fund. You can't invest in an index directly, you all know that. They do not, BlackRock's product does not synthetically create exposure through options trades to get exposure to the S&P 500. They actually buy the reference asset itself by investing in an ETF. And they disclose that the ETF, and it's in here, I'm not reading that specific part of what he's doing. Again, more so from a compliance standpoint. But BlackRock does reference the reference asset as the S&P 500, and they gain exposure to it by buying their S&P 500 index fund. We did research this fund, and BlackRock does disclose that they do not double dip, they rebate back the fees of their S&P 500 index fund to their buffered index fund because they're holding their S&P 500 index fund as the reference asset. But he says, it continues again, losses for each applicable hedge period. That they're going to provide an approximate 100% buffer against losses for each applicable hedge period. That's the outcome period that we have referenced repeatedly, Jacob. Jacob, explain how the outcome period is, and when we use these, how you have to go about buying them. Don't say which ones we use, but just say how we have to pay attention to this outcome period, or as BlackRock calls it, applicable hedge period. Yeah, the outcome periods for these are really those 12-month point-to-point timelines that we've been talking about. In our practice and how we traditionally use these is they're offered regardless of the provider. They're usually offered once every monthly period. There's 12 new offerings or 12 renewals throughout the year. Generally, it happens to be on the first trading day of every month. Because we're sitting here January 27th, 2026, the next offering would be the first trading day of February, which in this case is technically February 2nd. That's what I'm going to use in my specific example. In our eyes, typically, we purchase these for folks on the first trading day that they're available. By doing that, it allows us to know exactly what that fund's 12-month point-to-point outcome period is going to be. You know, hey, if I bought this on the first available trading day, February 2nd, and I hold it through the end of January next year, 2027, that's my full 12-month period. I know if I hold it for that full 12 months, that buffer's going to kick in on the downside. Regardless of what the market does, the maximum that I could be down is that fee of the fund itself that they're going to take out over that 12-month period. Technically, these are ETFs, and they're fully liquid, as we've talked about in the past. You could buy or sell these at any point in the middle of that 12-month point-to-point outcome period. We don't typically tend to do that, just because in our practice, when we're using these for decumulation and positioning, we're really purchasing them through the lens of holding it for the full 12 months, because we want to make sure that that downside protection is going to kick in. But in the middle of that 12-month period, even if you bought it on the first trading day of February, in my example, you are going to see volatility, both in the market, obviously, the underlying asset, and the fund itself in the middle of that 12-month period. They call this mark-to-market pricing. I'm sure we've talked about this in the past as well, but mark-to-market pricing, which is essentially just showing you, hey, if you logged into your custodian, you bought the February offering, and let's say you were looking at it in June of this year, so you're kind of four or five months into the hold, you're going to see that the value of your fund is going to be different than, obviously, what you initially put in. And it's all going to be dependent on how that underlying asset has performed from the day that you bought it at the beginning of February to exactly when you're looking at it in the middle of June. They have to show you, the custodian has to show you what another investor would be willing to buy that fund from you for at that exact moment in time based on those exact market conditions. That's that mark-to-market pricing. So you will see, if you look at this throughout the 12 months, there is going to be a little bit of volatility. It might be slightly up if the market's slightly up. It might be slightly down if the market is slightly down. But in general, we always kind of use these with the idea of holding it for the full 12 months because you know your downside protection and you know that cap rate on the upside. So that's what I'll say. I'll pass it back to you, Jim, and then eventually I can come back and do an example where you can talk about in a down market how this might look in the middle of the term as well. Is he muted, Chris? Sorry. I was talking and didn't know I was muted. Thank you. And I said some brilliant things. I gave you guys the winning lottery numbers for Powerball. That's it. I'm not going to repeat myself. But you blew it. You're not going to win Powerball now. Okay. Now that I'm unmuted, his last two questions, Jacob, are pretty much tied together. That's why I wanted you to go to the website of one of the providers. So he continues. With that in mind and the outcome period, and I like how you explained all that, he continues. In the podcast episode, it sounded like you described a 100% Buffett ETF as providing complete and full downside protection. In fact, Jacob specifically said these 100% Buffett ETFs have full downside protection. And the most you could lose in the downturn is the expense ratio. Well, we've addressed this, and Jacob correctly pointed out, and I've tried to point out repeatedly, it's during the outcome period, day one and day 365. Those are what matter most. And what happens in between is noise. And even with the 100% Buffett ETF, which Kalamos went on to explain to everyone when they were here, because they buy a 100% in-the-money put, downside volatility relative to whatever reference asset you're tied to, S&P, NASDAQ 100, Russell, Morgan Stanley, whatever you happen to be tied to, they have full downside protection on it. But because of mark-to-market during that 12-month period, it could be up a little, it could be down a little. But if you hold it for the full 12 months, yes, you will have, I don't want to say 100% guaranteed because as you rightly pointed out, the language has a wiggle room for them as with anything, even the money market. No investment. Even if you buy an FDIC insured bank CD, I'm sure somewhere, and I don't have one, but if anyone has an offering document on it, I bet you somewhere in there the bank is saying, yeah, you might not get the money back. There's nothing that's going to say there's a 100% surety, there just isn't. But not even a money market from the god of all investments, Vanguard, as I rightly pointed out. Anyway, so you asked, Jacob, will the 100% buffer ETFs truly provide full and complete downside protection all the time? No, you just pointed that out, right, Jacob, during the outcome period, mark-to-market. Exactly. It is going to fluctuate throughout that 12-month term. They have to show you based on what the market's doing since you bought it, what the value of your fund is worth currently at that exact moment in time. And that's important because we talk about these and we constantly reiterate that we purchase them through the lens of holding it for the full 12-month period so that you know you have that downside protection. But they are ETFs. They're fully liquid. And that's part of the reason why, Jim, I think you and I and Chris, you as well are comfortable using something like a 100% buffered ETF as a cash-like style of investment because it is liquid. It is an ETF. In an emergency or if those dollars needed to be accessed, they are going to be there. You can sell out of them. It's not like it's an annuity where you're locked in or even a CD where maybe there's an interest penalty or you have to be cautious of what interest rates are doing. They are liquid. You can get out of them at any point in time. And so the custodian has to show you what the value of your fund will be worth if you decided to get out of it at that moment in time. So an example, one that I've got pulled up in front of me, and I won't mention the provider here, but conceptually just kind of follow what I'm looking at here. This is a January 100% buffered ETF. So this goes from, in this case, the beginning of January last year 2025 to the end of December last year 2025. That's the full 12-month point-to-point period. And this is an interesting time because as you listeners probably remember, back in the April timeframe, early April, that first week of April, we always joke about it being the tariff tantrum when Trump initially announced all the tariff announcements and the market kind of shot down. That was a period of time where you saw short-term volatility on the downside. And it's interesting because when you look at this January 100% buffered ETF, I know you can't see it because we're on a podcast, but in front of me, I have the graph from this provider's website showing hey, from January 1st to the end of December, what did this fund look like? And the key thing to remember is you can see, assuming you bought this fund beginning of January last year, and we're looking at this on, in this case, April 8th of last year, four months into it, at that timeframe, listeners, from January to April 8th, the S&P was down about 15.3% almost. That was kind of the lowest point that I could see in this chart. It was down about a little over 15%. If you were to look at, if you owned this 100% buffered ETF and you were to look at your statement or your holdings in your custodial login portal, you would see your fund, the 100% buffer in this case, was down about 1.8%. So it is down, right? It is going to move up and down throughout the middle of that 12-month period, but it's never going to be anywhere close to one-for-one to what the market is actually down. Again, just to kind of reiterate it, the market is down 15.3%, this 100% buffer is down 1.8%. So it is going to move in the middle of that 12-month period. And conversely, I can give another example in that same timeframe, because as you listeners know, following April, the market has kind of slowly rebounded. It ended up being positive towards the end of last year. If I go out all the way to, let's just pick on an October timeframe. So we still have about two and a half months before the fund renews at the end of that 12-month period. But if I go out to October, at this point, from January to October, the market has fully rebounded. And the S&P is actually up about 14.5% from the beginning of January. If you were to log in and look at your fund value at this time, you'd see that the 100% buffered ETF is up a little over 5% at that exact moment in time. So it just kind of illustrates, listeners, that when you go in and you look at the value of this fund in the middle of that 12-month period, if the market's up, if the market's down, it is going to be reflected in the value of your fund itself. Again, we try to kind of purchase these through the lens of holding it for the full 12-month period just so that you know you have that full downside protection. But they have to show you what you would get out of that fund or get back from that fund if you sold it at that exact moment in time in the middle of the 12-month period. So hopefully those kind of examples, I hope you guys are following and those are useful in kind of looking at how this moves over the course of that 12-month period. It's actually a very interesting time frame that we're looking at here because it shows you pretty two extreme examples. It shows you relatively extreme volatility on the downside in that April time frame, but it also shows you progressively the rebound when the market ends up being up 14% in this case, and how that looks on the fund as well. So it's a very good use case to kind of get an idea and a feel for how these look in the middle of that 12-month period. Excellent, Jacob. Thank you for sharing that. One of the things that I want to point out when you were talking, because I can hear some of our VG-ers right now, Vanguard Engineer-style personality people, saying, oh, my God, why would I want that with a five? I'll really be up five. I don't know. What was the cap on that product? What was that? The net cap, just to make it easy, let's say it was 7%. Okay. And it would have earned that. Net means the fee because the market was up significantly more than that. And you might be saying, why would I want to own that instead of owning the market? Do not compare a 100% buffered ETF to the market. Just don't. It's kind of like apples and applesauce. They're related, but they've got nothing to do with each other. You wouldn't take applesauce and try to eat it like a raw apple. You wouldn't be able to even just hold it and be able to bite into it like an apple. You can't. They're both apples, but they're really not the same. A 100% buffered ETF should be compared to maybe a money market account, ultra short-term bond fund, something like that. Something with an equal amount of volatility and intent. During the outcome period, that 12-month outcome period, it's going to move. And Jacob did an excellent job trying to explain that. But it is not an investment. And I said that last week and I'll say it this week. If you are an accumulation planner, excuse me, an accumulation person, and you're saving for retirement, you shouldn't touch these with a 10-foot pole. That's my personal opinion. You should be 100% equities, 100% unbuffered, especially if you're in your 20s and 30s, and you're saving for something that's going to happen 40 or 50 years from now. But if you are a retiree with a positioned portfolio, and you need to make sure these dollars are available to you, say, in three years, just making that number up, so not immediately. It's not money you're trying to spend from right now, which if it was, should be in an FDIC-insured bank account or an FDIC-insured brokered cash reserve account. Theoretically, it could be in a money market account or in the one- to three-month T-bill ETF account thing we spoke about. But if you need money in three years, and you want to try to earn a little bit more than what these previous cash holdings yield, have a little bit of Are you still there? Well, I got a message that appeared across my computer screen that said, your Internet is unstable. Well, it stabilized again, so. Well, how much did you hear? Because I was brilliant for a while. It was only about 15 seconds or so, not even that, probably. So anyways, I'm not quite sure what you didn't hear, because I gave away the winning Powerball numbers yet again, and you guys just... I keep giving them, and I don't know how many more times I can do it. But anyways, folks. You were talking about how if you've got some intention with the money, and you want to grow, and you'd like to have the opportunity to make a bit more than other traditional cash-like investments, that's kind of the space for these. Correct. And as we have tried to get this listener to understand, and all listeners to understand, on these 100% buffered products, similar to the exact disclosures in the money market, you're never going to see in legal language that 100% promises that you're going to get your money back. You're just never going to see it on any investment. You just won't. Okay. He did ask, and you already answered it, though, but I want to make sure he understands we addressed this question, because his final question was, what do you think would happen inspired by the cash-like comparison you give if an investor put $100,000 in a 100% buffered ETF, thinking it would provide them with protection, coupled with growth potential, and the S&P subsequently dropped 50%? Well, I think this listener, if they try to sell it during the outcome period because for one reason or another they irrationally panic, they're being silly. You have to hold it for the full outcome period. But as Jacob tried to demonstrate with a 15% drop in the S&P in the near one-month period, if they had to sell, they would have been down about 1.8. But if they would have just held it, they would have got the full value, 7%. But even if the market ended down 50%, if they just held it to the 12-month outcome period, they would be down 50 basis points. Where'd I get that from? Zero on the market because the 100% in the money put paid out, minus the fee that the ETF was charging, which this listener said was 50 basis points. So that's how in theory these would work. Now I will say one caveat, and I'm not going to dive deep into this. You are looking at a product by BlackRock that works significantly differently than every other buffered ETF product. Make sure if you do move forward with it, you truly understand how it works. And Jacob, we don't have to get into it, but you and I have researched that in depth. And it does work I'd say significantly differently. It's still going to provide and promise to provide the 100% downside. But there's a lot of reinvestment going on with that fund that can sometimes be hard to follow. So just make sure you understand it fully if you decide to go forward with that one. That's all I'll say there. But hopefully, listener and listeners in general, you can walk away with a better understanding of what we meant by cash and cash-like, and how the language that you're going to see on these providers' websites and prospectuses and anywhere else that they're disclosing anything is going to be full of lawyer-written corporate legalese. The exact same language is also seen in an investment that is widely accepted as cash, a money market fund. So you're going to see language like this everywhere. Anything you want to wrap up with, Chris or Jacob? No, I think, you know, that's the email we went through from someone, but I'm sure there were others that had similar thoughts. So I appreciate this listener sending in that email so we can cover these topics, cover these points. Jacob, anything you want to add? No, no, nothing else for me. I mean, every situation is different, and I think it's good to get a kind of a base-level understanding of where something like this might fit into your unique kind of scenario, but you do have to just kind of make sure you understand, obviously, how it functions and whether or not it fits into your actual specific situation. So just obviously keep that in mind, but hopefully that was helpful in kind of walking through some examples of how this looks over the course of that 12-month period and how things look in the middle of that 12-month period as well. And one thing as we wrap up, as part of our ongoing due diligence, we track not only the buffered ETFs that we use, but we track competitor buffered ETFs. The majority of the buffered ETFs we use are 100% buffered ETFs, but occasionally we will use the 10% and 20% buffered products. We won't get into how, why, at least on this podcast. But we track the ones that we use as well as competitor ones, not every single competitor ones, but ones that we would theoretically consider using. And we track the entire outcome periods. And I'm not going to say which one, but one in particular underperforms consistently. And we've reached out to them on why. And they've tried to explain to us they have gotten better, but we've noticed a little bit of inconsistency. And that was with a 20% buffer, right, Jacob? Not 100%. I want to throw that company. Okay. They explained to us why, what they were doing. And when I say underperforms, it wasn't to the point of we were saying, oh my God, this is crazy. We would never use this. They blamed it on the cost of the ETF, that it was costing them more than what they felt it would be. We have noticed recently, when I say recently, the past two quarters, the underperformance has diminished. So either they're getting a better handle on their expenses or they're doing something different. Outside of that one buffered product, a 20% buffered product from one provider, every single one that we looked at, whether it's one that we use or one that we're just monitoring, either met what it should do or exceeded it. Not by much, but they either met what they should have done or exceeded it. So we are tracking this. We don't have a lot of data points that we can look at. So we feel our job as asset managers for our clients, not necessarily for you guys, but we do work for other people, we feel we have to look at the ones we're recommending, we have to look at the competitors, we have to compare the fees, we have to compare the cap rates, we have to compare the outcome periods and the outcome itself or we're not doing our job. So we do look at this and we do follow it. And so far we haven't seen anything except for that one company and we spoke to them several times. Hey, what's going on? Hey, what's going on? Hey, what's going on? We would get the same type of answer and it had to come down to their fees and they just weren't doing a very good job at handling their costs and expenses. But now we think they are because their outcome is beginning to reflect more of what that ETF should have been doing. So you can do the same thing yourself. That's the one thing I want to point out. The other thing, and don't lose sight of this, a 100% buffered ETF is not an investment. I'm sorry, it's not in my eyes. Because you are wiping away your entire downside, net of the fee and all the disclosure issues that this gentleman wanted to chat about. It's not an investment though in my eyes any longer. It's just another option for a cash-like holding that has the potential to maybe, maybe earn more than more traditional cash-like holdings of a money market or a multi-year guaranteed annuity or a bank CD. That's all it is. It is not an investment and it should not be compared to a 100% uncapped investment in whatever reference asset you have. I cannot make that clear enough. And people who don't like these products specifically compare them to an uncapped market. And that is apples to applesauce. Yeah, they're both tied to the S&P, that's about it. Yeah, they're both apples, but that's about it. Don't fall victim to that. Recognize what they are, where they fit in, and how they should be evaluated. Okay, I've said my piece. Okay, well, that'll bring the show to a close. Thanks, Jacob, for coming on. I know you have to run so you can bail out. I'm sure we'll have you on again. Not sure next week. I suspect we're going to do something else, but you never know. It kind of depends on how popular this is and how many questions we get, etc. Oh, Chris, mention that Steve is coming back. I know Jacob's gone, but mention Steve, the gentleman with the cash balance. Sure, we're working. So we had Steve, and I apologize off the top of my head, I forgot his last name, who talked to us a while back about cash balance pension plans and kind of how they have a few appropriate purposes, if you will, but there's a particularly intriguing strategy for high-income earning self-employed individuals close to retirement, kind of that category, that these cash balance plans can be kind of an interesting thing to consider in kind of a final years of work, fill a retirement plan substantially kind of an idea. And we're working to get him back on to answer some questions that we've had about them. So we've got that coming up at some point. Don't have a date yet, but we'll work on getting Steve back in. All right. Well, it'll be most likely the first two weeks of February at some point there. So not too far in the future. If somebody has, we got one email with a lot of questions in it and a shorter email. But if anybody else has cash balance pension plan questions that they hope Steve might be able to answer, fire them off to me and I'll get them to Steve and he will address them when he comes back on the show. Yeah, perfect. Thanks a lot, Jim. Stay warm in Ohio. Warmer days to come, although not a ton down in Florida, but certainly warmer than Ohio and Colorado, although Colorado is about the same temperature as Florida. We just have less beach here. So, yeah. So thanks everybody for listening and hope you found some of this interesting. And we'll be back with you next week with a brand new show. You have listened to Jim on the radio, read his quotes in the media and enjoyed his banter on iTunes. 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