March Madness

It’s an annual tradition! Well, except for 2020 when the tournament was cancelled. But it’s time to look at the NCAA tournament and see what kind of financial planning lessons we can learn from it.

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Transcript Of Today's Show:

Speaker 1: Hey, everybody. Welcome into this edition of Plan With the Tax Man. Thanks for hanging out with Tony Mauro and myself, as we talk investing finance and retirement. And on the show this week, March Madness. It's an annual tradition so we're going to talk a little bit about March Madness and the big tourney and see if we can find some financial lessons in some of these things we've got for you today. So, hang out with us and talk about this fun stuff with Tony and myself. Tony, what's going on my friend? How are you?

 

Tony Mauro: I am good. The spring is here. I'm ready for March Madness. I think maybe we just talk about who's going to win this thing and forget about all the other stuff.

 

Speaker 1: Well, we could do that too. So, I guess, are you a basketball fan? Do you like to fill out the brackets and so on and so forth?

 

Tony Mauro: Yeah, I'm a big basketball fan. I'll do the brackets just with my son.

 

Speaker 1: Sure yeah.

 

Tony Mauro: And my family. I'm not into it like some. So I do follow it and I enjoy it. We've got two teams in it from Iowa. One's a play-in game, which might be today or tomorrow, Drake.

 

Speaker 1: Yeah. We're taping this actually the day it kicks off officially, on the 18th. Yeah, so.

 

Tony Mauro: So yeah, it's always fun to watch and whatnot. My wife's got a little pool in her office so you pick out a bracket.

 

Speaker 1: Yep. I was going to say, offices. It's an annual thing we love to do. Obviously, last year was messed up like a lot of sports was. But so a lot of people look forward to it. There's office pools. Maybe you win a gift card or something like that, or lunch or something. Whatever the case is. Lot of people do things. Of course, you remember a couple of years ago, Warren Buffett actually offered a million dollars if you had a perfect bracket from beginning to end.

 

Tony Mauro: I remember that.

 

Speaker 1: But the odds of it are crazy. It's something like 900 million to one or something.

 

Tony Mauro: Mm-hmm (affirmative).

 

Speaker 1: It's pretty staggering. So I guess he felt pretty comfortable. And it's like, he's not hurting for the million bucks if it happened.

 

Tony Mauro: No, no, absolutely not.

 

Speaker 1: So anyway, let's talk about some analogies here I've got for you, Tony. Turn some of these things from March Madness into a financial lesson for us, if you will. Predicting outcomes, let's start there. And if you're like most people, you like to finish filling out your bracket, you feel pretty confident going into it. I've made some good picks. I watched some of the experts on ESPN. I really think I know what I'm talking about. And most of the time after the first weekend, your brackets' blown apart. Right?

 

Tony Mauro: That's it.

 

Speaker 1: So I don't know, experts? I mean, there's a lot of ways you could go with this. Sometimes you got to be careful of the experts or just be careful not to get too wrapped up maybe in thinking it's all going to go one certain way. Just be, I guess, maybe adaptable. Is that the lesson here?

 

Tony Mauro: I think that's the lesson. Whether it's retirement planning, educational planning, or just saving for the rainy day, obviously you got to try to predict the outcome because that's...

 

Speaker 1: To a degree sure.

 

Tony Mauro: Goal, and trying to shoot for it, but just like anything else in the planning world, there's job loss, there's bad markets, there's all kinds of things that tend to force us to change our plans. And we have to be able to adapt to that. Unfortunately in the brackets, once you pick your teams, that's it, you're done, but in life and with planning, you can adapt and you can make sure that if things start to go off the rails, so to speak, that you can pivot and do something else to at least hopefully get to that predicted outcome. Obviously in the brackets it's to win the things. You win your pool or whatever. In life, it's much more important of course, because you want to get to that end goal, whatever that may be. So.

 

Speaker 1: Right. I think that's a good way of looking at that. We got to be flexible to got to be adaptable. Things are going to happen and you can do your homework and you can get kind of a plan together, which obviously we talk about all the time. You want to plan with a tax man. You want to have that plan, but again, you want to just be a little flexible because life is going to happen. And so sometimes people, I think they go to see an advisor or a financial professional, Tony, and they think, "Okay, here's my collection of stuff, make me a plan." And then they kind of think, "Well, that's a set it and forget it." And that's just not the case.

 

Tony Mauro: That's definitely not the case. I mean, if you do that you could be okay. I think you have a better chance of being okay at the end, if you are actively monitoring and working on it and changing as your needs change and things around you that you can't control.

 

Speaker 1: Yeah. And of course, that's what you hired an adviser for, to help you with that. But it's still yours, right? I mean I've heard many advisors say I can't care about, or I shouldn't care more about your financial plan than you do. Meaning the person. It's their money. Right?

 

Tony Mauro: It's their money. I still have a lot of accounting clients that when they kind of mess up and say, "Well, I didn't get my stuff to you. I didn't do this. I didn't do that. You should have done that for me." Well, I care a lot about it, but I tell them that I can't care more than you do. I mean it's your business, it's your life.

 

Speaker 1: At least I shouldn't anyway. Right?

 

Tony Mauro: Yeah. I shouldn't. I mean, there's a problem if I got more worried than you. But definitely yes, that's the case.

 

Speaker 1: Okay. All right. Well, let's keep moving along here with some of my points I've got from March Madness and financial lessons. Upsets. Everybody loves a good upset, or maybe even a Cinderella story, right? Maybe a team that just, it wasn't expected to do very well. They come in, they knock off the number one seed, or they wind up making it all the way to the final four and nobody predicted it. Everybody kind of enjoys that kind of thing. It makes it more interesting and exciting. And I would imagine, well I don't have to imagine, I know there is. There's definitely upsets in the financial world or even some Cinderella stories, but you got to be a little careful too. I mean, again, that's the importance of maybe diversification so that if you have a Cinderella story, great, but if you have an upset, you're not hurting either.

 

Tony Mauro: That's exactly right as well, because a lot of people come to us and they want that Cinderella story. Just like in the brackets you want that team that isn't supposed to win, to win and go all the way. And same way in the financial planning world, you want to, a lot of people anyway, I guess, well, I want to pick that stock or that...

 

Speaker 1: You want to buy Amazon before it became Amazon.

 

Tony Mauro: Yeah, before it became anything. And you see things on Facebook and you see everybody talking about this or that, and you want to believe that that's going to be your Cinderella story. And you put $2,000 away or $5,000 away. In 20 years you're set, but...

 

Speaker 1: Right.

 

Tony Mauro: More than likely, that's not the case. Builds the case for, you need to diversify. You need to have more than one type of investment and you need to monitor them, of course. And I think too, everything has, just like the tournament, it's winners and losers.

 

Speaker 1: Sure.

 

Tony Mauro: What's good for some is bad for others.

 

Speaker 1: Fair point.

 

Tony Mauro: And they're talking a lot right now, at this time, about changing the tax laws again, raising taxes. That's going to benefit some people and it's definitely going to hurt others. And if it's the case that they want it's going to hurt higher income earners with people over 400,000 and it's going to help people with lower incomes. So there's always both sides of it.

 

Speaker 1: Yeah.

 

Tony Mauro: I think that in the investment world that needs to equate to you got to have diversification and you got to be ready to adapt and move around a little bit.

 

Speaker 1: I think it's a fair point. I think the fed, didn't they just say here recently telling at the time we're taping this, that they, I don't feel like they're going to move the needle on interest rates. They're going to probably hold that solid for a while. And so that has winners and losers based on that ramification too.

 

Speaker 1: So there's always some way to look at that.

 

Tony Mauro: Yes.

 

Speaker 1: Yes. I mean, there's definitely ways. There's always pros and cons and again, a good plan, a good balanced plan, a good strategy, really, if you're thinking about basketball, just a good coaching plan, right? You got the coaches doing strategizing, Tony, as they're making it through the different tournament rounds, if they're going from one round to the next, they're also having to adapt a little bit, because they're looking at game footage from the prior game, right? The teams are going to scalp them and so on and so forth.

 

Speaker 1: So I think a lot of what you guys do is kind of that same type of thing. You can have that good plan, you can have that good strategy, but we've got to regain plan from time to time as we move through. And that could be due to some of those upsets or one of those cases like that.

 

Speaker 1: How about the hometown thing? You mentioned that you guys got a couple of teams there locally in the tournament. If you want to look at it from this standpoint, everybody loves a good homer story as well, right? It's like, "Yeah my team made it in. They're not really good, but I'm going to pull for them and we're going to see how far we can ride this thing." And sometimes we do that with various products or industries or companies. When you think about financial stuff, Tony. Sometimes you're really loyal to a brand or maybe even the company you work for.

 

Tony Mauro: That's it. And going back to the tournament, of course we're here in Des Moines, Iowa, and of course, Iowa University's in the tournament. I think maybe number two or three seed. I think number two in their bracket. I watched them play all year and they're a good team. And so you want to pick your bracket with your heart and you have them going all the way and you look like a hero if...

 

Speaker 1: Right.

 

Tony Mauro: You happen to do it. But I don't know...

 

Speaker 1: Yeah, at the time we're taping this, I think Drake, which is there as well, right? They're playing,

 

Tony Mauro: They're playing the play-in gaming. And they're the Cinderella story because I mean, they were 25-4, but they're in the Missouri Valley and nobody expects much of them, but they let them in on the play-in game, because the record probably is convincing enough.

 

Speaker 1: Yeah. I think they're playing today at the time we're taping this on the 18th, I think around six or seven, something like that against Wichita, if I'm not mistaken, Wichita state. Yeah.

 

Tony Mauro: But reeling it back in the investment world.

 

Speaker 1: Mm-hmm (affirmative).

 

Tony Mauro: A lot of times people want to pick one fund or one stock or whatever, or one strategy and just say that this is all I want and they end up with two heavy awaiting and something or a strategy that doesn't work as things change in their life, which we just talked about.

 

Speaker 1: Right.

 

Tony Mauro: And now all of a sudden again, they're not going to meet their goals because of that. And so you still, again, it goes back to the case of you need to work on it. You need to, in my opinion, work with somebody to help you with that. So you're not just setting it and forgetting it and hoping for the best type of strategy, but it is something that I do see a lot of. And I they don't even pay attention to it.

 

Speaker 1: Yeah, you get too weighted in one category. Right? Is that what we're kind of talking about here? It's like having too much of one thing.

 

Tony Mauro: Yeah. Yeah. I mean that exactly. Just too much of one thing. They don't pay attention. We talk about it at Tax Time and they just, "Oh yeah, that sounds good." And they don't do anything about it. I mean, that's probably not the best route to go if you're really seriously talking about making it to your goal.

 

Speaker 1: True. Yeah. I mean you think about the company you work for, maybe it's a great company you're really into. They're giving you maybe some stock options or maybe you have the ability to buy. You're buying into it. But how much of your financial life is tied up in that one entity? And it's great to a degree. Right? But I guess with anything, Tony, even if it's your own company and a lot. the trajectory's looking good. I mean, do you really want to have more than a certain percentage of anything in any one investment just to be safe? Because if you could go back all the way to Enron, or you could talk to the folks from GE or there's a number of stories where you could say, "Hey, being a little too weighted in your own company, could spell some issues later on."

 

Tony Mauro: Yeah. I mean, it definitely does. I mean, even we have some larger companies here in town, mostly insurance companies, but Wells Fargo is a big player here, and of course they always reward, especially higher up employees, with stock options and whatnot. And some of these people end up with a lot of stock, like you said, in their own company. And as the company goes through goods and bad times, with Wells Fargo it's kind of like a dirty word around here. And I'm not knocking anybody that works there. We have a lot of tax clients, but they've kind of been through some issues and they've taken a few hits and ultimately that affects the stock. And then if you've got your entire retirement portfolio, let's say in one stock, boy, you hate to have some bad things come out, right when you need this money and then all of a sudden you don't have what you thought.

 

Speaker 1: Yeah, that's a great point. So just be careful, again. So we're having this analogy here with March Madness. It's one thing to certainly want to root for the home team, if you will, but just like any investment, make sure that you don't have too much tied up into one thing. Five, 10% is usually kind of the idea for just about any one type of investment. And then let's talk about risky picks on this last bit here, Tony. You mentioned the home teams. Okay. So we'll kind of tie these two pieces together. Iowa is actually second. They're going into it ranked number two and they're playing their first game against a 15th ranked seed, Grand Canyon.

 

Tony Mauro: Yeah Grand Canyon.

 

Speaker 1: Yeah. So, okay. So, let's say you want to buck the trend, right? And you think, "Hey, Grand Canyon is going to upset Iowa, and I'm going to put some money on it" or whatever the case is. Right? So you're taking that riskier pick, if you will.

 

Tony Mauro: And I've done that before in my brackets, where you try to be funny and you pick all these low seeds.

 

Speaker 1: Right. To win the whole lane. Yeah.

 

Tony Mauro: Yeah. To win the whole thing and see how far they go just for the fun of it. And every once in a while, I mean, you go back to some of the center ELLs that made it all the way there. It's great. It's great for the game of basketball and whatnot, but in the financial planning world, when you're investing, I mean, again, you don't want to just all of a sudden go out and find some speculative newsletter, let's say, because they're all over the place and say, "Well, I'm going to do this." It looks like the potential returns are very large and you ignore the risks and that kind of thing. And next thing you know, again, you've got all the eggs in one basket and that didn't really work out or you didn't pay attention enough to get in and out when you needed to. And again, that's a recipe for a definite disaster.

 

Speaker 1: Well there's taken some chances, right, Tony, but then there's also taken chances with your retirement money that, honestly, if you're being truthful to yourself, you just can't really afford to take, right?

 

Tony Mauro: No, no, you definitely can't. I mean, especially with retirement money and whatnot, you've got to have a good diversified strategy and manage that strategy. If you want to say use the basketball analogy, pick some number 15 seeds and you just want to kind of quote, play around.

 

Speaker 1: Sure.

 

Tony Mauro: Nothing wrong with that but I don't think that should be part of your overall, serious investment strategy by any means.

 

Speaker 1: Yeah. It's just like going to Vegas, right?

 

Tony Mauro: Yeah.

 

Speaker 1: There was a...

 

Tony Mauro: You might as well do that.

 

Speaker 1: Quote from, what was that gentleman's name? An economist. Paul Samuelson, I believe, yeah. He said investing should be like watching paint dry or maybe grass grow. It's not very interesting but it's nice and stable and steady. If you want excitement, take your money and go to Vegas. I'm paraphrasing, but...

 

Tony Mauro: Right, right. But you might as well do that and throw it on black or red or do whatever.

 

Speaker 1: Let it rip. Right. Exactly. Yep.

 

Tony Mauro: But I don't know for whatever reason, I think it's the creation and the popularity of the very, very low priced discount brokerages that have popped up all over and made it so. And the availability of information where we didn't have that 10, 15, 20 years ago at our fingertips that kind of feed some of that. And I've seen a lot of tax clients this year, thus far, bringing in investment statements from Robin Hood.

 

Speaker 1: Okay.

 

Tony Mauro: And that's a whole different conversation. But they kind of get on these kicks and they start playing around. And if that's what they're doing, and that's all they're doing, that's fine. But when you start seeing serious large, when we're doing a tax return, I don't want to say gains and losses, but proceeds, in other words, they're selling and buying large amounts. And then when you look at the gain loss and it's usually a loss or a very, very small gain, it's like, well, what are you really accomplishing here? You're having fun and just trying to hit something big or is this part of your overall strategy?

 

Speaker 1: That's a great point. And obviously what we've seen lately with Robin Hood and the game stop situation. We did that podcast and had the conversation about that. We get wrapped up in, I guess, the trend or the hot thing or the whatever, right? And that comes back to maybe bite us in the tush a little bit. So at the end of the day, folks, it comes down to having a good plan in place for you. Now we can simply sit here and talk about the March Madness thing and have a good time with the analogy and so on and so forth. But as I mentioned with the coaching, at the end of the day, Tony, it doesn't matter. If you put together a great plan and then your players don't execute it, right? It didn't really make much of a difference, same thing with the game.

 

Tony Mauro: Yep. For me, in basketball you got to have a great plan. You got to have players that can execute it. But at the end of the day, at least in basketball, if the ball doesn't go in the hoop you're going to probably lose, but you've got to have that plan. You can't just go out, otherwise you're basically playing pickup basketball.

 

Speaker 1: True. Yeah.

 

Tony Mauro: You don't want to pin your hopes on that kind of thing. But I agree with that. You got to have a plan.

 

Speaker 1: Yep. And while the stakes are high in the March Madness, they may be not quite as high as it is for somebody going into retirement. So get a plan in place if you don't or get working with somebody who can help you tweak the plan you've got to make some adjustments if you need to. Get that good coaching strategy going on, because life will throw us curve balls. Life will change things up a little bit. And so you want to make sure you've got a plan in place. And if you need some help, Tony's around. All you got to do is reach out to him. They are certainly very busy this time of the year, but you can still have your questions answered. Get on the calendar, whatever that might look like by calling (844) 707-7381 or stopping by the website, yourplanningpros.com. Don't forget to subscribe to the podcast. That way you can catch up on future episodes. Check out past episodes. As we talk about things, that'll hopefully spark some synopsis for you to get going on your own retirement journey or making some tweaks or changes along the way as you need to.

 

Speaker 1: This has been Plan With the Tax Man hit that subscribe button on Apple, Google, Spotify. iHeart, Stitcher, whatever platform you like to use. And again, you can find it all@yourplanningandpros.com, or you can just search it now on those apps.

 

Speaker 1: Tony, thanks for your time. Hanging out with me. Good luck to the hometown teams. And I'll talk to you soon.

 

Tony Mauro: All right, sounds good. See you later.

 

Speaker 1: We'll catch you next time here on Plan With the Tax Man with Tony Mauro from Tax Doctor Inc.

 

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