Mind the Gap

Talking Real Money - Investing Talk

Don McDonald

Education, Business, Investing, How To

4.5 • 811 Ratings

🗓️ 20 August 2025

⏱️ 41 minutes

🔗️ Recording | iTunes | RSS

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Summary

Don and Tom explore why real-life investors consistently underperform the market—thanks to emotional decisions, frequent trading, and flashy sector bets. They break down Morningstar’s “Mind the Gap” study and explain why your behavioral return often lags the market return. Listener questions lead into heated critiques of 403(b) plans packed with annuities, an exploration of the risks of overconcentration in the S&P 500, second-home planning in retirement, and the tax headache of unwinding inherited tech stocks. It’s a fast-paced episode packed with practical advice and sharp jabs at high-fee products and financial marketing nonsense. 0:04 Investor returns vs. market returns: why we underperform 1:32 Morningstar’s “Mind the Gap” study explained 2:59 Behavioral mistakes: trading too much, chasing sectors, style drift 4:48 Volatile funds lead to worse investor outcomes 6:39 Frank asks: What’s wrong with 403(b) plans? 9:14 The real problem with 403(b)s: annuities and teacher exploitation 13:12 Why annuities don’t belong in tax-deferred plans 14:04 How to escape a bad 403(b): 403bwise.org and “green light” plans 15:45 Listener Gabriel: Is S&P 500 enough for a long-term portfolio? 17:56 VOO vs. VT: Why global diversification matters 19:39 Concentration risk and emotional investing 22:08 Listener Garrett: Planning for a second home in retirement 25:10 Real estate reality: owning two homes isn’t always ideal 28:45 Listener Nina: Clarifying the senior tax deduction 30:07 Listener Jim: Where should I invest a $1M windfall? 32:47 Long-term strategy: globally diversified stock portfolios 34:27 Listener Lori: How to unwind a concentrated tech stock portfolio 35:20 Altria: A century of sin stocks and their surprising holdings 37:00 Program note: Tom solo next week—please call in! 38:46 English is weird: talk vs. tok, though vs. thru Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Reality Radio for a really great future.
0:08.0	We're talking real money.
0:10.1	It's the show that tries to make it easier to manage your dough.
0:17.5	I'm Don.
0:18.5	Welcome to Talking Real Money.
0:20.5	And joining me, as always, is my co-host Tom.
0:24.1	And we really do want to help you better understand how this world of money works for and against you and how you can make it work for you better.
0:37.3	855-935 Talk is our phone number, and we encourage you to call us on Saturdays to talk
0:45.6	about the money issues that are important to you personally, because we want to answer those
0:50.4	questions over those that, you know, we think should be answered. So give us a call.
0:57.3	855-935-t, talk 855-935-8-255. We talk a lot about returns on the show. What the
1:04.5	average annual return was for the S&P 500 or the Dow. No, we don't. We don't talk about the Dow.
1:09.1	No, we try not to talk about the Dow. It's stupid.
1:11.0	Try not to we don't. It's a stupid index. It's not even an index. It's an average. Yeah. But we talk about returns. We give you these numbers. We say things like, oh, the market returned an average of 9% per year or 8% per year or 10% per year over whatever period of time. But there's another kind of return that we also talk about occasionally.
1:31.9	And it's been studied by a lot of different people.
1:34.6	It's called the investor return.
1:36.9	And this is the return of real people in aggregate based on their actual trading of their securities in their portfolios.
1:48.4	And Morningstar did a study called their Mind the Gap study.
1:53.5	Isn't that what they use in the underground when you're getting close to this?
1:57.2	Mind the gap.
1:58.4	Well, that's in the two.
1:59.8	Stepping from the train.
	...

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