Investing for Retirement; Finding a Mint Replacement; Closing Credit Cards

In this podcast, Motley Fool host Ricky Mulvey and analyst Asit Sharma discuss:

• Transitory inflation for the toy business and beyond!
• The everlasting power of Barbie, Hot Wheels, and Lego.
• Coupang's acquisition of luxury online retailer Farfetch.

Motley Fool host Alison Southwick and personal finance expert Robert Brokamp open the listener mailbag and answer a question about saving in a portfolio of only stocks for retirement.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Dec. 19, 2023.

Ricky Mulvey: Toy prices fall and so has a luxury retailer. You're listening to Motley Fool Money. I'm Ricky Mulvey joined today by Asit Sharma. Asit, good to see you once again in the virtual world.

Asit Sharma: Ricky, good to see you as always.

Ricky Mulvey: Let's start. I want to have a little bit more fun on today's show. You know, we're wrapping up for the end of the year. Asit, there's some hardcore business stories we could dive into, we could really unpack the financials. But first, let's start with the state of toys.

Asit Sharma: No, let's do it, Ricky. I'm a little hurt for what this implies about our usual get togethers on this show, but nonetheless, let's have fun today.

Ricky Mulvey: It means that I'm trying today.

Asit Sharma: Come on, come.

Ricky Mulvey: It's the end of the year, we're trying to go out smoothly. I don't want you doing too much homework today, but holiday seasons rock and maybe you're getting ready for some travel. There's a business story here and the price of toys is down 3% from last year. A little bit of deflation in the economy, so what are you making of this?

Asit Sharma: Economist Paul Krugman had a really interesting article in The Times very recently. He was arguing that inflation was indeed transitory, as some were saying, like two years ago, it just took a lot longer for those temporary factors that were driving inflation to dissipate. I'll quote here, what happened in 2023 was that the economy finally worked out its post pandemic kinks, with for example, supply chain issues and the mismatch between job openings and unemployed workers getting resolved. What he's saying, Ricky, is that we should expect a little bit of dis-inflationary pressure. This is normal, and look, it's not a bad environment. We shouldn't read too much into the fact that toy prices are down. Let's, you know, go and buy a little bit more toys.

Ricky Mulvey: Yeah, I think this is also, I was looking at the data that was cited in the article. It's from the Consumer Price Index for all urban consumers, toys in the United States. This is a part of a very long downward trajectory for small plastic objects. It's also, I think, a little bit of a story of globalization in there. This year, we're doing some research, the top doll house on Amazon is the Barbie Dream House. You can thank the movie. It's going Asit for $130 back in 1965, that same the Skipper Deluxe Dreamhouse was going for about 100 bucks in inflation adjusted dollars. But even more than that, in the '80s, the advertised Dreamhouse, this was back in a Sears catalog. It was going for 300 bucks today. These toys, the big toy, the big Barbie toy, is going for about a third of the price of what it was in inflation-adjusted dollars in 1986.

Asit Sharma: Ricky, I think you've already put your finger on this. I mean, we've got two opposing forces at work. One is time value of money. A dollar today is worth more than a dollar in the future, so there's going to be some inflation. But in those inflation adjusted dollars, what are we seeing here? This is the triumph of mass manufacturing of plastic. [laughs] As you point out, I went back and looked at the pictures of that 1986 Doll House and the 1965 Doll House, fully expecting to see a lot more wood than I actually did. We just gotten better, sadly enough, at producing things straight from petroleum. There you have it.

Ricky Mulvey: There it is. I know there's the story in there where, it's the top doll house from back then. It's the Barbie Dream House. Today it's the Barbie Dream House. There's mixed up, I would say, rankings on when I was looking through Amazon, for example, one of the most popular action figures, or I should say toy sets, comes from something called Gabby's Doll House. Which I would say is Netflix's answer to make a mass market production show for children. But I know you were taking a look at some of the toys coming out. What struck out to you about some of the themes you're seeing play out, maybe Everlasting in this holiday season.

Asit Sharma: Everlasting is pretty much what it was when I was a kid and when you were a kid, Ricky. Mattel, Hot Wheels are going to be strong this year. I have to ask here, are you going to watch Hot Wheels the movie when it comes out?

Ricky Mulvey: I'm going to be very lame about it. I don't want to be let down. I might see what some of the I'm going to see what the Internet says and then be a sheep.

Asit Sharma: Well, apparently, this is currently in development with a team that supposedly includes J. J. Abrams. This could be a fun live action movie. We'll see.

Ricky Mulvey: He will protect your intellectual property.

Asit Sharma: For sure, for sure. Legos are looking strong, Ricky, and board games also should do well this year. Don't just take this from me, the things that I like. This is according to some market research firms, if you boil all this down, Euro Monitor, which tracks a lot of this stuff, says dolls and wheels are going to hold their own this season, maybe flat up a percent, while these other categories are going to flail around a bit.

Ricky Mulvey: Who are they holding their own against? That'd be like a video games, toy train sets, that kind of thing?

Asit Sharma: That's a good question. I think stuff that has more of batteries in it.

Ricky Mulvey: I think we always, we got the Everlasting stuff that makes it for a boring conversation. Everything old is new again. Let's talk about hot trends. Are there any hot trends for holiday spending for these gifts that you're keeping an eye on?

Asit Sharma: Well, for me, hot trends usually translates into warm doughnuts. But that doesn't make a good gift after you wrap it and it sits under the tree for a week or two or so. I went to better sources than myself. I sampled hottest gift list ideas from three distinctly different content mills, excuse me, outlets, Rolling Stone, Better Homes and Gardens, and Forbes. Now Ricky, between these three, they featured literally hundreds of hottest gift ideas. You and me thought we had a lot of time on our own hands. Let's roll with Rolling Stone, the first one. Rolling Stone features the BRONAX Pillow Slipper. I think this is fun because it recalls to mind maybe some Bros who are hanging out together and want a warm looking, again [inaudible] type of slipper to pull on their feet. I found that interesting. Better Homes and Gardens features, among many other ideas, the Bartesian professional cocktail machine. I think this must be a mix between artisan, Cartesian art.

Ricky Mulvey: I've had one of these. It's like they do like these cured K cup pods for cocktails.

Asit Sharma: Yeah.

Ricky Mulvey: There's a reason the golden ratio is golden for cocktails, but I wish them well with that one.

Asit Sharma: Now to me, this carries that trend to sort of an extreme. The description says the machine uses cocktail capsules and your preferred alcohol to create a cocktail in seconds. That just doesn't sound very appetizing to me, but maybe I should try one of these.

Ricky Mulvey: It's very concentrated. It's very concentrated.

Asit Sharma: Okay. I'll take your word for it. Well, and let's finish off with Forbes. Wedged among a lot of sharper image, Brookstoney-type offerings, literally between an organic wine collection and a Kitchenaid mixer, Forbes offers you Dearfoam's Men's Papa Bear, plaid slippers, Papa on one foot, bear on the other. Now that's more like it, Ricky. Just 18 dollars on the affiliate link to Amazon.com.

Ricky Mulvey: I feel contractually obligated to talk about a story involving more publicly traded companies right now. But let's continue on with the gift theme and that would be with Farfetch. It's the fall of a luxury retailer. This was an online platform for brick and mortar boutiques to sell things like Think Gucci Puffer Coats for 3,000 dollars. It has since been bought out by Coupang, a Korean e-commerce giant often compared to Amazon. Let's start before the acquisition though, Asit. What was the original promise of Farfetch and why were investors so excited about it?

Asit Sharma: I think the original premise was pretty simple, Ricky. This is a platform business, so it's an online market place that links up luxury retailers with those of us who like to purchase things online. The mechanics of it seemed pretty enticing. If you think about luxury goods which have an associated high margin, you get a lot of gross volume on the platform. The company gets its take from every sale you have, what could be a high margin business, and as it expands globally, more people come onto the platform, you have a volume business as well. The set up seemed pretty enticing to investors. The company had a successful IPO, but that excitement didn't quite last.

Ricky Mulvey: I think one of the reasons the excitement didn't last is the way that Farfetch approached acquisitions. One of the expectations from investors was that this was going to be very inventory light. You're just making a platform and you're taking a pretty chunky take rate of 30% on all transactions. Then they may have been caught off guard when Farfetch went out and acquired a company called New Guards which includes the luxury apparel line Off-White. So I guess was that the start of maybe the disconnect between Farfetch management team and investors with the acquisition approach.

Asit Sharma: I think that's where it started. One of the things that maybe it wasn't as visible to investors from the get go was that this was a more intensive business in terms of the cost of goods sold and fixed costs than most realized. If you are trying to draw thousands of retailers across the globe together, those who ostensibly themselves don't have the technical expertise to build their own sites and then provide that in a way that's searchable, a la Etsy, there's a lot of technology investment involved and there is a tremendous amount of sales expense. Sales and marketing expense. The economics really never worked out, even though I would say Farfetch did achieve some scale, it never saw a profitable year, cash flow started to really deteriorate after that first year following the IPO. Then as you mentioned, they were using capital, Ricky, to acquire businesses with the first messaging that we're doing, a little bit of vertical integration here, and then subsequent messaging that tried to really move this into its own like retail brand and they even had, I think, an in house expression of that. We've seen this play out before in e-tailing, it hasn't really ended well yet in any business that we've looked at, so maybe that writing was on the wall sooner than some noticed.

Ricky Mulvey: It's always easy to be right in retrospect, Asit. So more recently management is at this place where they say, you know what, we're no longer providing guidance and the previous guidance that we gave you, you just shouldn't listen to. How did they get to the point where they're just throwing in the towel like that?

Asit Sharma: One of the things that Farfetch did was to tie up with some other retailers as they were burning cash, and so the financial filings with the SEC really pointed to a lot of turmoil at the company and management. Now I think the attention has been split for quite a while in trying to salvage the assets. So they've approached a number of different potential buyers. Fast forward to today, there's what seems like an offer to purchase on the table, but it's really more of an extension of capital from Coupang, which is a South Korea based, well as most like to describe it Amazon.com of Asia. I think that when management reaches a point where it's hard to keep the lights on and you're scrambling to find financing, the business bleeds ever more money, and then you get to the point where, again, once in a while you see this where even the financials can't be relied upon and there's a lot of turnover in management. So they're at that place where everything's unraveling. But here comes Coupang with a half billion bucks to try to stabilize the picture.

Ricky Mulvey: Why do you think Coupang wants Farfetch? I mean we've just described what some may say is a dumpster fire. Why bring over a blanket, why inherit it in house?

Asit Sharma: Coupang is not a super recognized brand around the world. It is a dominant e-commerce brand in South Korea, it has amazing recognition there. One thing it gets access to is this luxury end of the market and Coupang can marry that to one thing that it is amazing at and that's distribution. They have built an unparalleled logistics operation in South Korea, which is mountainous terrain. Been able to replicate how Amazon.com operates in many of its fulfillment locations on perfectly flat land in South Korea, and they're actually a little faster than Amazon.com. You can order something at 7:00 AM from Coupang and have it delivered to your door by evening. Their reverse logistics or return logistics are also quite admirable. This is one thing they do really well and if they can start to extend that out a little past South Korea and cater to their own audience, which are higher income individuals. South Korea happens to be a country of both declining population, but a pretty wealthy population and a very tech savvy population. There is a path there where they can, I think, start to get wider distribution, get more name recognition, but also tap into a bit more margin. They're one of the few companies I can think of that actually could take those assets and make something of them. Because the original idea of these small, tiny dispersed luxury retailers was from the get go, just a hard unit economics proposition. But Coupang is a retailer that could make it work.

Ricky Mulvey: Asit Sharma, as always thank you for your time and your insight.

Asit Sharma: Thanks a lot, Ricky. I appreciate you have.

Ricky Mulvey: Up next, Alison Southwick and Robert Brokamp open up the listener mailbag and tackle your questions about budgeting apps, dividends, and saving for retirement. If you'd like your question considered for the next mailbag, shoot us an email at [email protected]. That is, podcasts with an S, @fool.com.

Alison Southwick: Our first question comes from Andrew. I am a long time listener and would like to hear your thoughts on a new study that makes an academic case for 100% stock exposure for retirement funds. Given the wealth of evidence that shows how much stocks outperform bonds over the long run and the previous decade or so, of very low bond yields. I don't understand the argument for bond exposure in retirement funds for middle aged and younger people, or at least the degree to which it's remained completely baked into the conventional wisdom. My retirement savings are almost completely in stocks. I'm in my '30s and have a small percentage of my company's default target date retirement fund which is 90/10 stocks, bonds, the rest is all in an S&P 500 index fund. I've watched the S&P outperform the target date fund by several percent every year, which will make a huge difference over the long run. I understand the arguments for larger bond exposure, but I don't find them that compelling. On the other hand, not everyone might have as big of a risk tolerance as I do. Anyway, would love to hear your thoughts. Thanks for all you do and happy holidays.

Robert Brokamp: Well, happy holidays to you too, Andrew. Let's start with the study which came out in October, and it's entitled, Beyond the Status Quo, A Critical Assessment of Life Cycle Investment Advice. What the authors did was they compared how much investors would have if they only invested in a portfolio that was 50% domestic stocks and 50% international stocks throughout their lifetimes. That's all they did, versus the classic 60-40 bounce portfolio or a target date fund, which is a mix of stocks and bonds. It starts out very aggressive when you're young and then gradually gets more conservative as you get older. Surprise, investing in stocks over the course of your life leads to higher returns and much more money. This is, after all, the foundational belief of the Motley Fool. Investing in the stock market is the key to long term wealth. Yes, if you're in your '30s and I have the risk tolerance for it, it's perfectly fine to have all your retirement money in stocks.

Heck, I'm in my 50s and almost all of my retirement money is in stocks. The issue, of course, is that sometimes the market drops dramatically, which causes people to either panic and sell, or they have to delay their goals. Imagine being close to or in retirement and seeing your 401K lose more than half its value. Which would have happened if you had an all stock portfolio from 2000-2002 or 2007-2009. The authors of the study do acknowledge this and they write that, "We are sympathetic to the discomfort and real costs of these bouts of poor short run performance." But they also say that reducing the pain of these periods by holding bonds, "comes at too high a price because investors must forgo the enormous economic gains from adopting the all stock strategy." That's true as long as the future looks mostly like the past.

I will point out that studies on withdrawal rates in retirement generally conclude that a portfolio that is anywhere between 40% and 70% stocks provides the highest safe withdrawal rate. Not a portfolio that is 100% stocks. I think the bottom line here is, if you're younger and you have the risk tolerance, sure investing in the stock market will likely lead to much higher wealth. But I will stick with the standard Foolish advice that you keep any money you need in the next five years out of stocks and in cash and bonds, and maybe extending that time line longer if you're close to or in retirement. If you have a moderate or conservative risk tolerance, then it makes sense to have some cash and bonds along with your stocks because the best asset allocation is the one that you can actually stick with.

Alison Southwick: Our next question comes from Dan. I was listening to the December 5 episode and Bro mentioned, by the way, Bro does it make you nervous when people start off their letters like that? [laughs] They're like on this day you said, and then you're like, oh no, what did I say?

Robert Brokamp: As long as it's mentioned, it's fine. If it's ever Bro recommended or Bro told me to do something, that makes me very nervous.

Alison Southwick: Dan writes, I was listening to the December 5 episode and Bro mentioned he is reviewing budget app platforms. Have been an avid Mint fan since I graduated college in 2016. As the service shuts down before the end of the year, I've been researching platforms like Rocket Money, Monarch, etc. Does the team have any recommendations as to the best budget apps?

Robert Brokamp: Yeah, in case you hadn't heard, Intuit is shutting down Mint by March of next year and encouraging users to move over to Credit Karma. They're not making you, you have to actually choose to go over to Credit Karma. It might be appealing to long term Mint users because you do get to keep most, but not all, of your historical data. Credit Karma does have some money monitoring features like you're able to see all your transactions in one place, categorize your spending, track your net worth, things like that. But many of the more robust features of Mint are indeed going away. So far I haven't done a thorough review of all the options out there, but I did get recommendations from some of my more financially savvy, Foolish colleagues, which I'll soon list. But first, I think it's important to consider what you're looking for. Let's start with some criteria to consider. Number 1 is, do you want a free tool or do you want something you have to pay for? Of course, as the saying goes, if you're not paying for a product, you are the product. Mint was free. If you've used Mint, you're probably used to that. You used Mint and then they would send targeted ads your way based on your money habits. As I get older and maybe a little bit more paranoid, I don't know, I'm more inclined to pay for something because I'm not as comfortable sharing my data, but something to consider. The other thing to consider is what you're looking for.

Do you just want a budgeting cash flow type of tool, or do you want something that also has things like portfolio analysis or retirement calculators? If you're married, you want to look for a tool that makes it easy to facilitate money management between the two of you. Some tools do a better job than that than others, and you might want to look into a tool that allows you to import data, either your data from Mint or anywhere else. By the way, you can export your data from Mint for those who are long time users and you want to save it. There's some instructions on Intuit's website on how to export it. I'll also point out that some of these other tools are providing promotions, basically trying to attract old Mint users. They're offering discounts for Mint users, although frankly, it's just a code, so you don't have to have been a Mint user to use the code. That's something to look for as well. Again, I reached out to a Slack channel we have here at the Fool for financially savvy fools, ask for their recommendations. I'm just going to read this list of the tools that fools recommend.

Copilot Money, Empower, which used to be known as Personal Capital, EveryDollar, Goodbudget, Honeydue, that's Honey D-U-E, Lunch Money, Monarch. Monarch is getting a lot of attention from Mint users, partially because it was designed by Mint's first product manager, so it has a lot in common. There's Quicken, of course, the OG of financial tools, and there's original Quicken, which is really good for people who have an accounting mindset. Maybe you are a business owner. But then Quicken also has a more Mint-like version called Quicken Simplifi, that's something to consider. Then we have Rocket Money, Tiller, which is great for people who love spreadsheets. Then YNAB, which stands for you need a budget. YNAB is the type of tool that the people who use it, love it, it has a very strong following. Then the other thing I'll just add is that many banks actually have their own tools. Many years ago they saw too many people going over to places like Mint and places like that, so they started offering their own tools. Quality varies significantly, but you might as well look and see what's being offered by your bank. Those are the options. Go forth into the Internet, you'll find plenty of articles and videos that compare and contrast these various options and I think you'll soon start to zero in on an option that you'd like to give a try.

Alison Southwick: Have you zeroed in on any options that might appeal to you?

Robert Brokamp: I use Empower and Mint, but now I'm not using Mint so much. I like Empower because it's known for its retirement calculator, but that is also a free tool. Basically, you just get marketed an awful lot which I've gotten used to. I am intrigued by Tiller because it's spreadsheet based, and the thing I like about spreadsheets is then once you have the information and everything, you can customize it a little bit more. Those are probably the ones. I'll definitely take a look at Monarch just because it's getting so much buzz and the people at the fool who are trying it like it so far, so I'll give out a look as well.

Alison Southwick: Our next question comes from Josh, self described Fool subscriber and loyal listener from Wisconsin. I was looking to close down three of the six credit cards my wife and I had accumulated over the years just to simplify things and to streamline our monthly bill paying routine. I manage our bills each month and there's just too much to keep track of. I worry we're going to miss a payment simply because the seldom used cards are easy to forget about. We don't need the cards in question either, so who cares? But I see a lot of articles online saying it hurts your credit rating to close your credit card account. We have excellent credit with a mortgage, student loans, car payment, etc., all always paid on time. Why would this hurt our credit rating? Does the good making your finances easier to manage outweigh the bad, a possible debt to your credit rating? Also, is it better to close the account yourself versus leaving it unused and having the issuer close it for lack of use? Thanks for taking the time to answer this, and thank you both for the excellent work you do on your podcast. Thanks, Josh.

Robert Brokamp: Yeah, thanks, Josh. Unfortunately, closing your credit card could indeed lower your credit score for two primary reasons. One is that 30% of your score is determined by your credit utilization ratio, which is essentially the amount of your revolving credit card balances divided by your credit limit. Experts recommend that you pay off your balances each month, or at least keep your credit utilization ratio below 30%. But when you close a card, your total limit goes down. In other words, you're reducing the denominator which increases your utilization ratio. The other issue is that 15% of your credit score is determined by the length of your credit history. If you close a card you've had for a long time, you'll reduce your credit history, though not necessarily immediately, because it generally still stays on your record for 7-10 years. While it's a pain to maintain all those cards, it likely is better for your credit score if you keep them and use them every once in a while. That said, if you really want to close one or more of your credit card accounts, here's some tips. First of all, do it during a period of your life when you don't expect to need a loan anytime soon. You want to make sure you cash in any points you've earned and pay off the balance beforehand. If you can, close cards that are newer and/or have lower credit limits, that way they won't have as much of effect on your credit history or your credit utilization ratio. You also might want to call the companies that offer the cards you want to keep and see if you can increase your credit limit on those cards so you can maintain a lower credit utilization ratio. If you really want to play it safe, mail a certified letter to your credit card issuer to cancel the account and request written confirmation of your zero percent balance and close the account, and then check your credit report a couple of months later just to make sure the account was actually closed.

Alison Southwick: We actually closed some credit cards and then saw our credit score go up because we started paying it off weekly, which I know is maybe not what Josh is looking to do, but we paid it off weekly and then we saw a pretty good bump in our credit score.

Robert Brokamp: That's good. Another factor that happens is, again, it's your average credit history, so if you've closed a card you've only had for a year, that actually increases your average history. That also could be a bump up to your credit score.

Alison Southwick: Our next question comes from someone who didn't leave their name. That's cool. If a company is paying out millions or tens of millions, maybe even more in dividends on the same day and most folks reinvest those payments, does that serve to temporarily, artificially inflate the stock price, ultimately leading to the reinvestment of those funds not going as far in terms of share count? That was a lot of adverbs in a short amount of time, but I still nailed it.

Robert Brokamp: You certainly did. When it comes to dividends, there are a few dates to remember. First is the declaration date, which is when the company announces the size of the next dividend and the market will react to that. Especially if it's a really good dividend, folks will maybe buy the stock, or if it's a particularly bad dividend, folks will sell it. You have that market reaction to that announcement. Then the next date is the record date, which is when people have to be on the company's books as a shareholder to get the dividend. But a day before that is the ex-dividend date. Anyone who buys the stock on the ex-dividend date or later will not get the dividend. The stock often drops around the ex-dividend date, roughly in line with the value of the dividend because people who buy it then won't get that dividend, but also because the company is just about to distribute millions of dollars in cash. Therefore, the money is no longer worth as much as it used to be because it doesn't have as much cash on its books, so the price adjusts downward.

Now, a lot of that cash does indeed go toward buying more shares of the stock or other stocks. Does that bump up the price a little bit? The answer is likely yes, again, just a little bit. A study published in 2021 by Samuel Hartzmark of the University of Chicago and David Solomon at Boston College, took a look at the effect of dividends on the overall stock market. They found that the days that had a high amount of dividend payments from companies saw returns that were four times higher than days with low amounts of payouts. But the difference was less than one tenth of 1%. While dividends do affect stock prices and share counts and things like that, the magnitude is generally pretty small and probably not something worth trying to time if you're a long term investor.

Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about. The Motley Fool may have formal recommendations for or against it. Don't buy or sell anything based solely on what you hear. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.