Transcript
Intro
Stephan Shipe: Welcome to the Scholar Wealth Podcast. In today’s episode, we’re starting with a question from a listener who inherited a gold coin collection and wants to know if now is the right time to sell. Then we’ll tackle a question about whether moving a few million into foreign currencies makes sense as a hedge against instability in the US banking system.
And as always, we’ll wrap up with a rotating special segment. This week we have Money Masters, where our guest, Byron, shares how he built confidence as a DIY investor, reached financial independence, and reinvented himself in retirement. So let’s go ahead and get started with question one.
Question 1
Listener: I inherited a collection of gold coins from my parents, who always told me to hang onto them — gold was the ultimate backup if the US dollar ever lost value. So for decades, I held onto them and recently had the collection evaluated at $250,000. Now that I’m 68 and gold prices are high, is it time to sell? Given today’s economic and political environment, does selling now make sense? I’ve spoken to an auction house that charges a 20% commission. How do I know a fair fee from one where I’m being taken advantage of?
Stephan Shipe: So this is a good thing to get into. It’s something we’re hearing a lot of lately. First, it’s always great to find $250,000 worth of gold value that you can be dealing with, and it’s gone up significantly, even over the past year.
So we’re starting to hear a lot more of this gold question of is now the time to get out? It’s gone up so much over this year. Does it need to stay there as part of the portfolio? So I think in your case, we have a couple of things to unpack. The first is really gold’s role in your portfolio, and gold has historically been a great hedge for uncertainty, especially when it comes to inflation concerns or just instability.
So that’s not uncommon, and not uncommon or not surprising that we’ve seen so much of an increase in value over the past year or so. The issue though is that sometimes it gets misconstrued as something that is a good hedge against uncertain times, where it’s not volatile, and that’s not necessarily the case.
Gold prices are actually just as volatile as stock prices, which sounds counterintuitive because people look at it and say, well, things are worrisome, I’m a little concerned about the market, so I’m gonna move into gold. But actually, when you run standard deviations and volatility over the past few decades, gold’s price bounces around quite a bit.
And we’re seeing that again this year. So the risk of that is that maybe it comes down some, of course, just like any other asset. I think the big question is, do you need the $250,000 in gold now? One issue that you have is the actual maintenance costs, so to speak, of having a bunch of gold bars, the holding costs associated with these assets.
So you have gold coins or bars, now, you’re talking about — assuming you just don’t have them under your mattress, right? — we have either cost related to a safe or safety deposit boxes, insurance, all of these different concerns around keeping them and managing where they’re at. Being able to sell them and shift that over to something like a gold ETF or something that gives you exposure to gold would be the easiest way if you’re looking at this just as a hedge against instability, saying, I like to hold the gold because I want an inflation hedge, and there’s not a reason for you to hold it directly. Then shifting over to an ETF makes perfect sense.
Sell it and then move over to an ETF. If you’re actually wanting the physical gold, in case we get into a zombie-like situation and you need the gold, then clearly moving to an ETF isn’t gonna help you, and maybe you keep $50,000 of gold or so in your portfolio, but it’s not uncommon to hold five, ten percent of a portfolio in commodities, especially something like gold. I just don’t know if I would hold five or ten percent all in physical bullion of your portfolio.
So if we assume that you’re gonna get rid of it and the need for that is gone — which I think I lean more to — we have to start looking at the tax impact and the auction scenario.
So the tax impact — the only thing I’d throw at this one is because there’s a significant amount, you have to be careful of the different tax rates on collectibles. So there would be a step up in basis. So whenever you inherited these, or whenever they were gifted to you, you’re gonna wanna go back and find out what the value was at that time. So that way you’re looking at the difference in value from the step up in basis to today’s value. And that’s what you would have as a gain during that point. So that’s gonna be important and at a number like this it’s worthwhile. Do some digging and find out what the gold prices were at time of inheritance to get a rough number there.
The auction house is really interesting and a red flag definitely goes up on the 20% fee that they’re gonna charge for this, especially when it comes to gold and precious metals. The reason for that is if I was going out to an auction house and trying to sell some furniture, maybe a fee of 15–20% could make sense because it’s gonna be harder for me to sell on my own. The auction house is going to play a pretty major role in being able to exit that asset.
However, when we’re talking about gold or silver, especially if it’s not jewelry, and when you’re talking about gold or silver, you’re talking about something that’s a commodity. By definition, it’s commoditized where gold is gold is gold. So you go to one jewelry store, pawn shop, auction house, they’re all gonna give you roughly the same amount for that.
Now in your case it makes sense to consider an auction house because they can piece this up, especially if some of the coins are worth more as coins or some of the bars are collectibles or anything like that where they have more value than the intrinsic value, then the auction house really starts to shine in that scenario.
But the 20% fee is really high for a commodity. I think you’re probably gonna be closer down to the 10% mark on a typical auction fee for this type of scenario. So be careful on that. Know that this is not something that’s gonna be difficult for them to sell. And the way they can split it up in an auction and the way they can group everything together, there’s already a floor that’s being set.
Again, it’s not furniture, it’s not some artwork or something that has a value that’s dependent on what somebody’s going to pay for it. There will absolutely be bidders that will create a floor for that collection. Especially if it’s broken up, that’s gonna be easy to attain and easy to come up with a value for.
So make sure that transparent fees are set up and you know exactly what you’re gonna pay, but 20% is too much and I’d be extremely surprised if they’re not willing to negotiate for that big of a collection. Because even at 10%, they’re looking at taking home $25,000 on your collection on the seller’s fee plus the buyer’s fee that they’re gonna charge as well.
So it sounds like a great day for them and could be for you. So now onto our next question.
Question 2
Listener: Most of my assets are in the US, but I already hold about a million in euros, and I’m considering moving another three to five million into other foreign currencies or overseas accounts as a hedge against instability in the US. I’m not sure whether to focus on a few specific countries or take a broader approach. What’s the best way to add currency diversification without creating unnecessary risk?
Stephan Shipe: When you’re getting into this currency conversation, there’s a lot to unpack when it comes to what the implications are. And I think it’s really easy to have the mindset of, I want to reduce risk, so I’m just gonna go overseas.
What you have to realize is you’re swapping one risk for another. You’re swapping US risk for another country’s risk, which is not necessarily a bad thing. But in your case, you already have some exposure to the euro. So wanting to move three to five million over of the portfolio to a different country — that doesn’t sound crazy, especially depending on the size of the portfolio.
I think the question is, when you move it over, what are you going to invest it in? Are you just holding the currency? That may be okay if you’re just looking to hold liquidity and you would be holding that much in, let’s say, USD today, or I wouldn’t even say treasury bills, but you’re not gonna get the same interest overseas.
So by taking some of that money and moving it over, that in itself is not necessarily a bad thing. I think what we need to start thinking about is what it gets invested in and what type of exposure you’re looking for to diversify away from the US. So for instance, when you’re looking at going over to a different country, what I commonly hear is, well, I’m gonna go pick a country and I’m gonna go hold a million dollars over in this country, in this currency.
And the issue you run into is now you’re swapping US risk for whatever the risk is of that country. Historically, it’s always been Switzerland, right? You can move some to the Swiss franc and you’re finished, and you have the stability there. But what we’ve seen recently — and this just happened over the past few weeks — is getting a lot of questions around moving things out of the US, whether it’s to international equities or to international currencies, and then we see a tariff come smacked on Switzerland, which no one would’ve ever expected. That immediately starts to create instability in Swiss financial markets. So that, if anything, highlights the uncertainty about going into one country or another.
So how would we hedge against that then? If you were set on saying, Stephan, I’m moving $5 million out of the United States, then the option you’d have is to start diversifying to multiple countries. Probably stick with developed economies to make that a little easier. And you pick up a few developed countries, buying currencies — maybe five to ten currencies that you’re buying — and now you have a collection of international currency that ideally becomes a diversified portfolio that removes a lot of the idiosyncratic volatility of any one individual country.
Now, the difficulty there is what does that get invested in, because now you’re adding a lot of complexity. You would need to rebalance those as currency fluctuations happen. You’d want to maintain certain weights in each of those currencies, so you’re constantly buying and selling different currencies to have that weight. Not necessarily too much of a hassle if you have five to ten different currencies there. You’d want to make sure the broker you’re working with has the ability to do currency trading. So support exchanges — implications there.
The other end of this is if you’re trying to diversify out of the US and the first thought in your mind is just currency, there are other ways to do this that’ll actually earn you a little bit higher of a return. Because ideally, unless you’re trading currencies — where if you thought you were making a bet on the value of the euro versus USD, that’s one thing, where you’re going with a trading strategy and you’re expecting to earn a return on the delta between the two — if you start going in and saying, I’m just wanting exposure outside of the US so I’m just gonna go buy five to ten other currencies, then you’re not really expecting to trade them. You’re just looking at that as a store of value.
The only problem with the store of value is it loses value to inflation. So we’d want to have it invested somewhere. This is where something like an international bond fund would keep you in a simpler situation without having to deal with all the currency fluctuations directly. So you can at least have some stability with the bond side, the fixed income side of things, with exposure to different countries. So I like that idea.
In this scenario, you can also start thinking about different equity exposures as well. That’s a lot harder these days than it used to be. In fact, we’re seeing this now — if you go back 30, you probably honestly have to go back maybe 40 years — back to where international markets were truly international. Where you didn’t have as much globalization, then it would be a lot easier to say, I want exposure outside the US to hedge risk in the US and create some true diversification.
The only problem with that today is that now with the rise of globalization over the past 30–40 years, countries have become more intertwined. There’s been more access, the internet has linked a lot of countries together, financial markets have linked together more and more. So if there is an issue in the United States, the odds that that is an isolated issue and it’s an issue in the US that doesn’t affect any other country is really low, and that’s not likely to be the case.
And we’ve definitely seen that with different tariff policies. What that comes out as is that the decisions made in the United States absolutely impact the decisions of different countries. So that means the companies that are in those different countries are gonna be impacted by the US regardless. I don’t know how much diversification you’re necessarily gonna get on the equity side there.
Now you could say, well, that’s developed markets. I’m gonna move some to emerging markets because those are gonna be less connected. That’s absolutely true, but again, you’re swapping risks. You’re going to move away from US exposure into emerging markets, but your emerging markets are gonna have their own unique risks of being an emerging economy. So they’re not gonna have the developed financial systems that provide that level of stability.
So if we keep it simple and we move that over to some bond funds, maybe some international equities to an extent, I think that’s gonna give you a lot more of that exposure away from the US without just giving up returns. And then keeping some liquidity in different currencies if you’re concerned — if you already have a liquidity bucket that’s meant to be in cash — then investing some of those, I think that makes perfect sense. I don’t see that as a problem there, especially if it’s a small 5% of a portfolio.
Rotating Special Segment: Money Masters
Stephan Shipe: Then we can jump into our rotating segment for today.
So this is gonna be an exciting one. We’re excited to welcome special guest, Byron, to our Money Masters series. This is where we spotlight real stories of people conquering complexity and building financial confidence. Byron’s journey from disciplined saving to a successful retirement is full of great lessons for all of us. So let’s dive into it.
So today we’re here with Byron and welcome to the show. So why don’t you give us a little bit of background. Tell us about your story. What’d your career path look like? What made you interested in handling your finances, your approach to money?
Byron: Hey, Stephan. Sure. So I’m an engineer, and that of course entails a lot of school.
I got a job as an intern at a large computer company. I worked as an intern while I was a senior, and then I went full-time when I graduated. After a few years, I arranged to go back to school full-time and actually got my company to pay for it, which is always a bonus. So they paid for it and they also paid me a partial salary, and the only stipulation was I had to make good grades and I had to agree to work for them year for year when I graduated.
So I got my master’s at Georgia Tech, and then went back to work for this company when I finished. I had designs on getting a PhD, but I quickly decided that financially it was probably better for me to stop after the master’s and not go deeper than that. It’s usually the case. So, you know, decisions always involve trade-offs.
And as an engineer, I’m trained to gather information before making any decisions. And I always, you know, look at the pros and the cons, weigh them against each other, and for me, choosing to get an advanced degree and foregoing some salary for some amount of time was a no-brainer. And I’ve always come down on the side of learning and educating myself and investing in myself.
That’s kind of the approach that I’ve always taken when it comes to decisions about anything, not just money.
Stephan Shipe: Did that all start with the money management aspect? Like when did you start changing that idea of being interested in pros and cons, things of investing in yourself and starting to invest in the markets? Did that come naturally as a transition or did that take some time to have that mindset shift over?
Byron: Again, as an engineer, I understand what exponential growth is. I understand it very well, and compounding over long periods of time — there’s magic in that. And so I knew early on that I wanted to save for my future, and I wanted to make sure that I was in control of how that was invested.
Now, I started with this company about the time when the high tech companies were going away from pensions and going toward 401(k)s, and so that was perfect. I didn’t want the company to be in control of what was happening with my savings. I wanted to be in control of that. I wanted to be in control of how much I was saving and what I was investing in.
Like any other decision, you have to educate yourself on what’s available to you and what the plan options that I had available to me on my 401(k) were. I didn’t really know much about them, but I could certainly learn about them. And so I spent a lot of time going over prospectuses and looking at histories and trying to decide what was the best way to invest going forward.
And what I figured out was it’s not so much about what you’re invested in as long as you’re invested. And when you have a long time horizon, you want to make sure that you’re invested aggressively. Because any mistakes that you make or bad things that happen in the market, you can overcome that with time.
That’s the magic of compounding. What’s the adage? It’s not timing the market, it’s time in the market. So I knew that from day one, I wanted to be investing in my 401(k), and I knew that there would come a time when the amount of money that I was able to deposit in the plan would pale in comparison to the amount of money that was thrown off by the gains.
And so I just wanted to make sure that I was in. I wanted to be in.
Stephan Shipe: That’s super intimidating for people though. So you took over your finances from a DIY perspective, first thing, right? You always had that mindset going forward, and that is not an easy thing to do. Did you always have that perspective starting off though, that you had this compound… or is it just later on that you look back and you say the compound interest thing really is magic?
Byron: That’s the engineer in me. Like I said, I understand what exponential growth means, and I’m smart enough to know that I cannot outsmart Wall Street. What I can do is I can make sure that I am always in the market and taking advantage of what the market is able to provide in terms of this compounding engine.
For me, it wasn’t so much about what was I investing in, it was just making sure that I was invested, and I wanted to make sure that the things I was invested in were things that were going to be growing. I wasn’t looking at putting a lot of money in bond funds. I was making sure it was all equities, all stocks all the time. A hundred percent.
Stephan Shipe: It worked, right? It paid off. You’ve been able to see both ends of the compound interest. How does that feel now? What are your thoughts on — retired now — you’ve been able to reap the rewards of everything you showed on the compound interest side? What are your thoughts on retirement now?
Byron: I think I’ve said this to you before. The accumulation phase for me was easy. There wasn’t much decision making involved there. You save as much as you can, sacrificially if possible, because you know that you’re sacrificing today what’s going to be better tomorrow. It’s easy to say, it’s easy to understand, maybe it’s not so easy to do. But by doing that from day one and making it a habit, exercising that saving muscle, if you will, it puts you in a position where you don’t notice the sacrifice anymore.
Eventually, it becomes a habit and you want to make sure that that habit is always being stroked. I would try to make sure that I didn’t spend too much time looking day to day at what was happening to my savings, but I would look at it often enough to know that I was going in the right direction, and that was always stroking that ego, if you will.
Stephan Shipe: Now you shift, right? That seems to be the hardest point.
Byron: The accumulation phase was easy. Now the hard part is turning that off and actually taking money back out to live off of, and knowing that you’ve got enough put away that you’re not going to be in trouble later on. That’s another inflection point for me in investing in myself and educating myself how to do that.
It’s yet another phase of reinventing myself, if you will. The Byron 2.0 or the Byron 3.0 now.
Stephan Shipe: What insights have you come up with with Byron 3.0 here? What are some of the secrets for the retirement side of things? How are you enjoying it, and what types of things have you found fulfilling? So anything surprise you about the retirement side after making that shift?
Byron: You know, my wife and I have only been fully retired — my wife’s been retired a number of years longer than I have — but we’ve only both been fully retired for a little over a year. One thing I’ve learned or have figured out is that just because you’re retired doesn’t mean you can’t put the time into planning what’s going to happen now, what’s going to happen next.
You don’t have this financial plan and set it on autopilot, and now when you’re retired, you just turn the crank and nothing ever changes and you just ride off into the sunset happily. Yeah, you want to ride off into the sunset happily, but things do change, and you’ve got to put the time in to adjust your plan where needed.
You don’t have perfect foresight to know how things are going to go, and so you’ve got to make those adjustments going forward. One thing I will say is it was very eye-opening to me when I reached the point of, hey, I don’t have to work anymore. I can still work if I want to, but I don’t have to. That’s such a freeing position to be in.
And once I did retire, yes, I did pick up a contract, but it’s only because I wanted to. And the work is basically doing the same thing I was doing when I retired for a different company. But there’s so much less stress and I’m doing something that I love doing. I wouldn’t have worked all my life doing what I was doing if I didn’t love it, but I’m able to do it now because I want to, not because I have to. The paycheck — that’s just gravy.
Stephan Shipe: So when you hit that point of saying you don’t have to work anymore, only if you want to, obviously freeing in some ways, but did that create any anxiety too, of this void of all these possible outcomes that can exist?
Byron: Yes. Oh yeah. It’s a whole other metamorphosis of “what do I want to be when I grow up?” You have to ask yourself that question again. What do I really want to be when I grow up? Now I’m at that point in life where I don’t have to do the same thing I’ve been doing day after day after day for years and years.
I can take stock of what is the one thing that I really want to do that provides meaning and joy in my life. Before, I found joy in providing for my family, but I’ve done that. Now it’s about — it almost sounds selfish — but what can I do to find joy for me?
Stephan Shipe: That’s awesome. So what advice would you give if somebody’s out there listening to this saying, “I want to be like Byron one day. I want to be having that conversation of the philosophical side of what I want to be when I grow up.” What advice do you have to give to somebody who wants to take control of their finances, manage themselves the way you did?
Byron: I will say I was very fortunate to have a cohort of work friends that were in the same situation I was. At some point during my career, the company that I worked for decided they didn’t want to do hardware development anymore — a computer company didn’t want to do hardware development anymore — and so they transitioned a bunch of us to this world-class company that does server microprocessor development.
And in the process, we could either keep our 401(k) with the old company, transfer it to the new company, or we could transfer it to an IRA and direct the investments ourselves. And we all chose to do the latter. We didn’t call ourselves an investment club, but in reality, that’s what we were.
And so we gamified the investments into a competition, and nobody’s gonna compete if they’re not trying to win. So the best way to win in that situation is learn everything you can and try to do it better than everybody else is doing it. And so I had this cohort of guys that we bounced ideas off each other, but we all tried to one-up each other and do things that were maybe not the wisest decisions financially, but in a lot of ways I felt like it was play money because I still had this 401(k) with the new company and I was contributing to this. The other was just a playground, if you will — an investment playground.
And so I learned a lot about my temperament for investing with that. I learned also a lot about what I didn’t know and that I could learn from other people. There were a lot of investments that we would go into lunch meetings with these guys and once a month we would throw out an investment and defend that decision to invest in that company against all comers.
So you figured out a lot of where you were weak in your understanding of what those companies did. I learned how to read a balance sheet. I learned how to read a financial statement. And I learned how to pick what I hoped were good companies and stay invested in them for the long term. And that’s really the secret — you buy good companies, you want to find ones that have good financials, and then you want to hold on.
And you’re gonna make mistakes. I think most people, when they look back over their investments, it’s easy to look at where they sold something at a loss and say, “That was my biggest mistake.” But in reality, if you really want to look at what your big mistakes were, you look at the ones that you sold too soon and what they did after you sold them. That’s where your big mistakes are, and I learned from that that it’s really about holding on.
Stephan Shipe: So back to your time in the markets, better than timing the market — this is exactly what people need to hear. I don’t think people hear this enough, that it’s an option. There’s just so much out there that you can’t do it yourself; you’re gonna end up making mistakes that are drastic, to just hand everything over.
Byron: One of the things I did early on — when I was, like I mentioned, with this cohort of guys — I started following The Motley Fool, and the biggest thing I learned from them was that I could do it myself. I didn’t need somebody else to tell me what to do.
Wall Street was this magic cloud of complication nobody could really understand, and it’s not really that way. You can make of it what you want and you can dive in, and it’s not hard. It’s not that hard. Generally, if it is complex, it’s not worth investing in.
Stephan Shipe: You got it. This has been fantastic. Thank you so much for sharing this with us. Extremely helpful to a lot of people listening. I appreciate it.
Byron: Been a lot of fun.
Disclosure
The guest on this podcast was a client of Scholar Financial Advising as of the date of recording, and was not compensated for their time. Nothing conveyed by the guest should be construed as a testimonial or endorsement of Scholar Financial Advising, and their experience as an investor or a client may not be representative of all investor or client experiences.
Scholar Advising is an independent, fee-only financial advisory firm focused on providing hourly financial advice. The information provided in this podcast is for general informational and educational purposes only, and is not intended to constitute financial, investment, or other professional advice.
The opinions expressed are those of the hosts and guests and do not necessarily reflect the views of any affiliated organizations. Investing in financial markets involves risk, including the potential loss of principal. Past performance is not indicative of future results. Before making any investment decisions, consult with a qualified financial advisor who can assess your situation, objectives, and risk tolerance. Thanks for listening!