View the full transcription of this episode here.
Many investors default to a single broad index fund, often the S&P 500, because it’s simple and low-cost. In this episode, Glen and Robert discuss how that approach can work for certain types of investors and when it may not align with specific objectives or risk profiles.
They also dive into ETFs vs. mutual funds, explore diversification across asset classes and regions, explain bond mechanics and duration, and walk through tax-loss harvesting and mutual fund capital-gain distributions in practical, plain language.
What they share: Both can hold baskets of stocks or bonds and can track indexes or follow active strategies.
Key differences highlighted:
Glen and Robert point out that broad market exposure doesn’t always mean broad diversification:
Concentration risk: Market-cap-weighted indexes can become top-heavy, meaning a few companies drive most of the performance. If those leaders stumble, the entire index can feel it.
Diversification gaps: Sticking to just one index can leave you underexposed to small caps, international markets, or bonds, areas that behave differently in various market cycles.
Practical takeaway: If you invest through indexes, consider multiple, complementary indexes as part of a diversified strategy that aligns with your financial objectives and risk profile.
Remember: Diversification does not assure profit or protect against loss. International and small-cap securities can be more volatile and may involve currency, liquidity, and political risks.
Robert walks through how bonds work:
Glen and Robert discuss how taxes can quietly affect returns—and why smart positioning matters:
Tax-loss harvesting (TLH): Realizing losses to offset gains may reduce taxes in certain circumstances, depending on your individual tax situation. They explain the 30-day wash-sale rule, which disallows a deduction if you buy the same or “substantially identical” security too soon.
Mutual fund distributions: You can owe taxes on a fund’s distributed gains even if you didn’t sell shares, especially during volatile markets with heavy redemptions.
Always consult a qualified tax professional before implementing any tax strategy.
Rather than simply buying one index and holding on, Glen and Robert describe a “sniper approach”: combining broad ETFs with selected individual securities or targeted funds to manage concentration risk and tailor exposure.
This can offer flexibility, but also involves additional risks and potential trading costs that investors should carefully consider. Selecting individual positions adds the potential for higher trading costs, tracking error, and the risk of underperformance.
GDS Wealth Management (“GDS”) is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided is for educational purposes only and should not be construed as investment, tax, or legal advice. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. Indexes are unmanaged and cannot be invested in directly. Diversification and asset allocation do not ensure profit or protect against loss. ETFs and mutual funds are subject to market volatility and the risks of their underlying investments. Tax information is general in nature, consult a qualified professional for advice specific to your situation. Advisory services are offered through GDS Wealth Management. For more information about our services, fees, or to view a copy of our Form ADV, please visit www.gdswealth.com.