Speaker 1: Welcome to How the Money. I'm Joel and I and
Speaker 1: Matt and today we're discussing investing in a volatile market.
Speaker 1: That's right, man, we are talking about investing, And honestly,
Speaker 1: before we even dive into this, I feel like it's
Speaker 1: worth mentioning how we understand that not everybody is in
Speaker 1: a position to where they can invest lots of money
Speaker 1: right now in a volatile market to take advantage of
Speaker 1: these downswings that we're seeing and so, but but that
Speaker 1: being said, there are a lot of hang ups that
Speaker 1: people have when it comes to investing in the market
Speaker 1: when there are lots of fluctuations, and so that's what
Speaker 1: we're gonna talk about today, Werena. We're gonna talk about
Speaker 1: how to actually go about investing in a volatile market,
Speaker 1: as well as ways that we can kind of control
Speaker 1: some of our emotions as well, because honestly, isn't that
Speaker 1: the biggest hang up that we have? Like we know
Speaker 1: what we should be doing, but are emotions that keep
Speaker 1: us from doing the right thing. So I'm excited that
Speaker 1: we're gonna talk about that. How do you control your emotions? Matt,
Speaker 1: I bottled them up, I tamped them down. Uh, and
Speaker 1: then when no one's looking, I just break something off
Speaker 1: the corner. Watched, like, where the why is this dish broken?
Speaker 1: I don't have no idea how. I don't know what happened. Yeah,
Speaker 1: I don't know. These are randomly breaking all around the house.
Speaker 1: And that's one way. Yeah, that's one of the Hulk method.
Speaker 1: As Kate and I have been catching up on our
Speaker 1: Marvel movies as you know, yes, yeah, I know, I know. Yeah,
Speaker 1: you've been doing that all right. Yeah, Well, I'm looking
Speaker 1: forward to to tackling this topic Matt and there. Yeah,
Speaker 1: there's so much to say for people in all different
Speaker 1: areas of their investing lifetime. And I think in particular
Speaker 1: for our listeners who are younger, the ones who didn't
Speaker 1: necessarily go through the Great Recession. They were in middle
Speaker 1: school or high school or something like that ten years ago,
Speaker 1: and they didn't have any sort of money on the table.
Speaker 1: They weren't investing at that point in time. Well, this
Speaker 1: feels like new territory for people like them. And so yeah,
Speaker 1: I think it's important to address this topic for sure.
Speaker 1: But before we get to that, Matt, you recently got
Speaker 1: scammed on Facebook marketplace, got scammed? How much money did
Speaker 1: you lose. No, I did not get scammed. So previously,
Speaker 1: we know we've talked about the stimulus money, and you know,
Speaker 1: I we we discussed what we should do with that
Speaker 1: stimulus money. How some of that money, maybe ten percent,
Speaker 1: it's good and even healthy to spend on yourselves as
Speaker 1: a sort of splurge. And I mentioned treat yourself exactly,
Speaker 1: treat yourself. And I mentioned that I was looking at
Speaker 1: a bike. Well, I got my bike, by the way,
Speaker 1: I got my Salsa Journeyman, which is a sweet bike.
Speaker 1: I'm not being paid to say this. I love it
Speaker 1: that much. But I did want to be responsible, and
Speaker 1: so I made sure to sell a bike. You know,
Speaker 1: we kind of have a little bike shop going on
Speaker 1: in our in our basement. So I listed that bike
Speaker 1: on Facebook via the marketplace, and it went within a
Speaker 1: day or two, it was gone. And I am on
Speaker 1: top of that kind of stuff, and so I marked
Speaker 1: it as sold, right, And so that's how I knew
Speaker 1: that when I received a text message on my phone
Speaker 1: that said, hey, is this item still available? And it
Speaker 1: had a Facebook link to a marketplace. You know, you
Speaker 1: could see it in the U R L. And I
Speaker 1: almost clicked it, but I thought, wait a minute, that
Speaker 1: listing shouldn't be live at all, because I remembered that
Speaker 1: I had marked it a sould right uh, And so
Speaker 1: I looked at the u r L a little bit closer,
Speaker 1: and I saw that it was not a legitimate Facebook
Speaker 1: u r L. I thought it had like a subdomain
Speaker 1: going on, because it had like secure what I thought
Speaker 1: was a dot right. I thought it said secure dots
Speaker 1: Facebook dot com or whatever, but in fact it had
Speaker 1: a dash, which means it is not a subdomain. It's
Speaker 1: a separate u r L actually, or specifically, it's a subdomain,
Speaker 1: but not a Facebook of some fraudulent site. So I
Speaker 1: was that close to actually clicking that link, but I
Speaker 1: was a little curious to see what they would say,
Speaker 1: and so I did reply back, and I was like,
Speaker 1: what's the item? Obviously I did not hear from them
Speaker 1: after that, but I wanted to mention that because a
Speaker 1: lot of us have experienced with scams via Craigslist, but
Speaker 1: this is the first time I had ever received a
Speaker 1: scamy right or a spamy message from a Facebook listing.
Speaker 1: So I wanted to mention that just to make our
Speaker 1: listeners aware that make sure that you're being careful with
Speaker 1: you know, with the links that you're clicking, even if
Speaker 1: it's a message through Facebook. I mean that link could
Speaker 1: have been, since I'm guessing, through messenger or something like that.
Speaker 1: But the fact that it was sent to me outside
Speaker 1: of Facebook via text messages that definitely raised a red flag.
Speaker 1: And so a lot of folks might be in a
Speaker 1: similar situation as me. Just make sure that you're being careful. Yeah, man,
Speaker 1: it's like, I don't know, four or five months ago,
Speaker 1: I saw Consumer Reports wrote an article on, you know,
Speaker 1: the expansion of Facebook messenger scams. They've really really proliferated.
Speaker 1: So that's a that's a good warning, and I'm glad
Speaker 1: you didn't click on the link. Who knows what sort
Speaker 1: of personal info they're trying to mind or And I
Speaker 1: feel like too. Right now, the scams are just abounding,
Speaker 1: with coronavirus, stimulus checks, p p P loans, They're just
Speaker 1: all sorts of scamsters trying to get in the mix.
Speaker 1: It's highly unfortunate. It's terrible to watch. But we have
Speaker 1: to look out for ourselves and be careful not to
Speaker 1: click on errant links and not to have conversations with
Speaker 1: people that we don't know at all. And yeah, so
Speaker 1: that's a good warning to to share with people. But yeah,
Speaker 1: I didn't get scammed. I wasn't gonna give Janie any
Speaker 1: of my information. Well, Jane, it's that's a classic scammer
Speaker 1: name too obvious, so obvious. Sorry to any listeners out
Speaker 1: of their name. Chance. Alright, ma, let's talk about the
Speaker 1: beer we're having on the show today. This is a
Speaker 1: Theena Pair dso from Creature Comforts Brewing Company. They're right
Speaker 1: around the corner from us in Athens, Georgia. This is
Speaker 1: a fruited Berliner Vice. It's got cherries, raspberries and cranberries
Speaker 1: in it, and I'm looking forward to having this one
Speaker 1: on the show with you today, my friend, man, this
Speaker 1: is a seasonal beer. This is something that they really,
Speaker 1: I guess, pretty much every spring, like early spring. And
Speaker 1: this is one that you picked up recently to donate
Speaker 1: to the show, So thank you, Joel. Well do every spring.
Speaker 1: I ended up buying like three six packs of this
Speaker 1: one because I love this beer so much. A good one.
Speaker 1: So all right, we'll talk about that one at the
Speaker 1: end of the episode. But I think people know I'm
Speaker 1: gonna like it, all right, Matt Well let's get onto
Speaker 1: the subject at hand. Today. We're talking about investing in
Speaker 1: a volatile market, and volatile markets in particular bring out
Speaker 1: the worst in investors, or they can bring out the
Speaker 1: worst in investors, because we're Austin guilty of overreacting to
Speaker 1: the good news and the bad news alike. If the
Speaker 1: news is good, we get invigorated and we think it's
Speaker 1: going to continue to be good, and if it's bad,
Speaker 1: we get pessimistic and it's hard to looking at the
Speaker 1: future and see when things could turn around. Right. So,
Speaker 1: investing while the market is experiencing volatility like he is
Speaker 1: right now takes some amount of nerve on our part.
Speaker 1: Right people are out there selling off their steak in
Speaker 1: particular companies right now for a reason. Some sectors are
Speaker 1: suffering in a big way right now, like, for instance,
Speaker 1: who knows how long airlines are going to suffer profit
Speaker 1: declines because of COVID. Are people going to continue to
Speaker 1: fly in the same way even as restrictions continue to
Speaker 1: get lifted in different cities and parts of the country.
Speaker 1: Is flying ever gonna be the same That's kind of
Speaker 1: question that investors have to tackle right now, and that's
Speaker 1: why some of the airlines stocks have had a massive hit,
Speaker 1: and it's important to note that the market is more
Speaker 1: volatile based on a confluence of factors at the moment too,
Speaker 1: many many of which are based in economic reality. That
Speaker 1: lots of American businesses are going to have a tougher
Speaker 1: time moving forward because of the pandemic we've experienced. But
Speaker 1: as long term buy and hold investors, Matt Right, buying
Speaker 1: in a down market is crucial to our wealth building efforts.
Speaker 1: It's something we have to do, we have to get
Speaker 1: comfortable with, and that's why we felt like we really
Speaker 1: had to cover this topic today on the show. Yeah,
Speaker 1: I guess you know, it's sort of not unlike us
Speaker 1: having to get used to living with COVID nineteen as
Speaker 1: as part of our lives now. But I agree man,
Speaker 1: continuing to buy and hold they are both far more
Speaker 1: difficult to do in a volatile market for most investors.
Speaker 1: And then on top of that, when we hear terms
Speaker 1: like bear market and recession and being thrown around, it
Speaker 1: makes it even harder for many of us to to
Speaker 1: continue to invest. But it is crucial that we continue
Speaker 1: investing when the market is in a state of turmoil
Speaker 1: because it can give us a big boost to our
Speaker 1: overall net worth. You know, it is, as we've said before,
Speaker 1: buying a stake in a variety of American businesses on sale.
Speaker 1: And although it always feels good to buy, you know,
Speaker 1: a consumer good, maybe an item of clothing or a
Speaker 1: new bike like I just got at a steep discount,
Speaker 1: we have a much harder time feeling good about buying
Speaker 1: stocks that are on sale, or even buying them at all. Yeah,
Speaker 1: it is amazing, how the inverse is not true. How
Speaker 1: that's the one thing in our lives that we have
Speaker 1: the hardest time buying on sale is is the American
Speaker 1: stock market or the world stock market, but almost anything else,
Speaker 1: we're like super pumped. Yeah, so true man. Uh. But still,
Speaker 1: it's so crucial that we do this, and this has
Speaker 1: a big benefit to our future self. Yeah, for sure,
Speaker 1: it totally does, Matt. I was impressed to you. I
Speaker 1: I recently saw a study from Vanguard that showed that
Speaker 1: a majority of Vanguard investors in particular didn't make any
Speaker 1: changes to their portfolio in in the recent wild down swing,
Speaker 1: in particular in decline that mostly happened incredibly quickly in March,
Speaker 1: and of us Vanguard investors stayed the course. They weren't
Speaker 1: doing any buying or selling apart from their regular dollar
Speaker 1: cost averaging that happens out of every paycheck, and so
Speaker 1: that was pretty cool to see, right, Vanguard investors might
Speaker 1: not be the norm, though I haven't seen more studies
Speaker 1: necessarily showing that customers of other companies are doing something differently.
Speaker 1: But but Vanguard investors are by nature because of the founder,
Speaker 1: Jack Bogel and his philosophy in buying and holding, they
Speaker 1: are probably a little different than the average person. I mean,
Speaker 1: Vanguard investors in particular subscribe to that Bogel uh investing
Speaker 1: philosophy where you buy for the long haul, and you
Speaker 1: buy super diversified funds yep, cheap index funds that are
Speaker 1: widely diversified. And there's even people, Yeah, the Bogel investing
Speaker 1: philosophy man has taken on such a life of its own.
Speaker 1: There's a website called Bogel Heads, and they're basically these
Speaker 1: followers that are so in love with Jack Bogel, his philosophy,
Speaker 1: what he started. That there are forums where people discuss
Speaker 1: how great it is. But I think we can learn
Speaker 1: from those investors. Right that the resolved to do very
Speaker 1: little or nothing in a market like this where they
Speaker 1: are willing to stay the course even in the midst
Speaker 1: of a lot of turbulence. You know, what's important here
Speaker 1: is that they didn't do the biggest sin, which is
Speaker 1: actually sell some of their portfolio as the market was
Speaker 1: going to decline. Because on one hand, this seems like
Speaker 1: good news, right if investors stayed the course, that means
Speaker 1: they didn't lock in those losses by selling. But on
Speaker 1: the other hand, maybe this is bad news, right, Like
Speaker 1: there are a lot of missed opportunities if you didn't
Speaker 1: purchase more funds during that recent plunge in the market.
Speaker 1: A lot of this depends on your temperament and your
Speaker 1: ability to withstand losses, and it also depends to on
Speaker 1: the phase of investing that you're in as well. Right,
Speaker 1: if you're in the growth stage of investing, you're gonna
Speaker 1: be able to withstand some of these turbulent times, right,
Speaker 1: because the more turbulence you experience, that means you're exposed
Speaker 1: to risk, and that risk is crucial when it comes
Speaker 1: to growing your portfolio. But if you happen to be
Speaker 1: in the preservation stage of investing, it's it's a lot tougher,
Speaker 1: So whether these ups and downs like that as you're
Speaker 1: drawing on that money, as you have a need for
Speaker 1: your portfolio where the there's also a big difference in
Speaker 1: seeing an actual numerical decline. Let's say the same investor
Speaker 1: at age twenty five at age fifty five have the
Speaker 1: same exact allocation in a total stock market fund, but
Speaker 1: one has been investing for thirty more years. They've got
Speaker 1: so much more at stake. A twenty five year old
Speaker 1: has been investing probably for two or three years in
Speaker 1: all likelihood, and the fifty year old has been doing
Speaker 1: it for close to thirty. So there's something psychological about
Speaker 1: seeing a massive number drop, even if the percentage is
Speaker 1: the same amount. Right, Sure, Yeah, I'm sure seeing a
Speaker 1: drop on a million dollars feels a lot different than
Speaker 1: percent drop on ten thousand dollars, even though, like you said,
Speaker 1: the percentage is the same. Yeah. Well, before we get
Speaker 1: into the specifics on investing in volt the mark it,
Speaker 1: I want to quickly talk about kind of some investor
Speaker 1: sentiment right now, in particular individual investors like our listeners,
Speaker 1: like you and I. There is kind of this belief
Speaker 1: to a certain extent that the stock market is ignoring reality.
Speaker 1: The bear market obviously happened really quickly. Stocks took a
Speaker 1: pretty sharp rebound, and despite a lot of hard unemployment news,
Speaker 1: despite a lot of hard medical news coming out, the
Speaker 1: stock market just kind of continued to rise. And it
Speaker 1: was freaking people out, like why is the stock market
Speaker 1: not reflecting what's happening right now? So I thought that
Speaker 1: was kind of important to cover, and I got just
Speaker 1: a couple of thoughts. I think, you know, one thing
Speaker 1: that we experienced in this downturn, in particular, what we
Speaker 1: experience just a lot of government intervention in the market
Speaker 1: that's been taken to like an extreme that we've never
Speaker 1: seen before. So I think that's one reason that the
Speaker 1: stock market has actually been performing better than it probably
Speaker 1: otherwise would have. Injecting that kind of money into this
Speaker 1: system that supports unemployed Americans, direct payments to almost all Americans,
Speaker 1: and grants to sustain small businesses as well. It's the
Speaker 1: massive actions that the FED took to show up the
Speaker 1: main street of eonomy. It's created a lot of solvency,
Speaker 1: and it's also created a lot more optimism than than
Speaker 1: we would typically see for investors. Just to know that
Speaker 1: the government is there and has the backup of the economy.
Speaker 1: And granted, a lot of those programs haven't gone quite
Speaker 1: quite according to plan, some of them have been really
Speaker 1: poorly implemented. But I feel like we have seen companies
Speaker 1: that otherwise might have gone bust, might have had a
Speaker 1: really really hard time climbing out of the COVID trough
Speaker 1: that they've been put in. I think it's no wonder
Speaker 1: that we're seeing actually a more positive sentiment from investors
Speaker 1: then would normally be the case in a typical recession
Speaker 1: of years past. Yeah, and you know, to specifically address
Speaker 1: to just the the difference between what we're seeing in
Speaker 1: the stock market and what we're seeing in our day
Speaker 1: to day lives. Right, the difference between Wall Street and
Speaker 1: the difference between Main Street is that investors are optimistic
Speaker 1: because of all this money that has been injected into
Speaker 1: the economy, and you can see that optimism daily and
Speaker 1: by the minute based on stock tickers. Right. I think
Speaker 1: investors do have reason to be optimistic. But then the
Speaker 1: question is why do we see what whate is like
Speaker 1: our lives trailing that optimism in the stock market. And
Speaker 1: I think that comes down to the nature of what
Speaker 1: we've experienced, right, I mean, there's been government mandates that
Speaker 1: we need to stay home. Businesses have been forced to
Speaker 1: shut down for you know, over a month, you know,
Speaker 1: some close to two months, and it takes a long
Speaker 1: time to start that machine back up, right. It's like
Speaker 1: this massive freight train that, uh, it's pretty hard to
Speaker 1: stop on a dime. But we pretty much did that,
Speaker 1: which is crazy, But it takes even longer to get
Speaker 1: that train rolling again. It takes a lot of energy
Speaker 1: and a lot of time. And so I think that's
Speaker 1: kind of the difference between what we're seeing on Wall
Speaker 1: Street and what we're seeing on Main Street. Then overall,
Speaker 1: you know, I think a lot of folks might be
Speaker 1: asking the question, should the government have intervened that much?
Speaker 1: Should the FED head stepped in like they did? And
Speaker 1: you know, I think you and I would say that
Speaker 1: it was largely necessary in order to prevent our economy
Speaker 1: and businesses and just the markets from taking even more.
Speaker 1: You know, we we've yet to see the long term
Speaker 1: effects of that involvement, But this is an explanation as
Speaker 1: to why we are seeing the stock market recover, but
Speaker 1: at the same time we're seeing our local businesses and
Speaker 1: and even national companies lag behind when it comes to
Speaker 1: their ability to conduct business, but then obviously when it
Speaker 1: comes to their earnings as well. Yeah, we don't really
Speaker 1: get a whole lot into macroeconomics map. This is kind
Speaker 1: of a big situation where macro economics has impacted us
Speaker 1: in a microway with stimulus checks, with the need to
Speaker 1: take on these government loans if you can get one
Speaker 1: through the PPP program, through the s b A, and
Speaker 1: also too, we saw some of these big companies, the
Speaker 1: big airlines, Carnival cruise lines get money from the government.
Speaker 1: Was that the right move? I mean, it's really hard
Speaker 1: to say, and a lot of smart people come down
Speaker 1: on different sides of that issue. So it's not something
Speaker 1: that we're gonna cover too much here. But that was
Speaker 1: an interesting question because I think a lot of people
Speaker 1: are seeing the stock market doing really well in a
Speaker 1: time where they're not doing really well, and it's hard
Speaker 1: to see. But that's also kind of the way it
Speaker 1: happens sometimes. That's kind of what happened after the Great Recession.
Speaker 1: The stock market almost led the recovery. There were a
Speaker 1: lot of people predicting the stock market was going to
Speaker 1: go lower and lower, it was going to continue to
Speaker 1: sink in a time when it started to rebound. That
Speaker 1: was hard for people to fathom in the after at
Speaker 1: the banking scandals in the foreclosure crisis, but it happened.
Speaker 1: So yeah, I'm glad we touched on that a little bit.
Speaker 1: But okay, well, we're gonna get to some personal considerations
Speaker 1: and how people need to think about investing right now,
Speaker 1: in particular in a volatile market. We're gonna get to
Speaker 1: our thoughts on that right after the break, all right,
Speaker 1: so we are back from the break. We're talking about
Speaker 1: investing in a volatile market. And when we say investing
Speaker 1: in a volatile market, we actually mean putting your money
Speaker 1: into a volatile market. Uh, and we also mean it
Speaker 1: from the standpoint of how to do it right now. Right,
Speaker 1: So that's what we're gonna talk about right now. We're
Speaker 1: gonna talk about how to actually go about doing that.
Speaker 1: But first we want to point out that your own
Speaker 1: personal finances that is going to dictate whether or not
Speaker 1: you should be investing right now. Your your personal finances,
Speaker 1: like that's gonna actually take priority over investing right now,
Speaker 1: because investing in a bear market is a great thing,
Speaker 1: right if you are not trying to time the market.
Speaker 1: And if you're investing for the long haul, and if
Speaker 1: you have steady income but you don't once to prioritize
Speaker 1: investing if your paycheck isn't secure and you don't also
Speaker 1: have a solid savings back up. Also, if you are
Speaker 1: close or if you are in retirement, you know, there
Speaker 1: are other impacts you need to consider as well. If
Speaker 1: if its downswing has you freaking out a little bit
Speaker 1: because of the portfolio erosion that you've suffered, you may
Speaker 1: not be properly allocated, and that's something that you can
Speaker 1: change as well. And also you might need to maybe
Speaker 1: rethink some certain financial levels that you have, perhaps you know,
Speaker 1: pairing backs and you're spending or even working a little
Speaker 1: bit longer. There is more to our personal finances and
Speaker 1: our money than just investing, and so make sure that
Speaker 1: you have those kind of basics squared away first before
Speaker 1: you kind of continue with our conversation today. Yeah, and
Speaker 1: everybody right now, I think has to have a written
Speaker 1: investing plan. That's such a crucial part of being able
Speaker 1: to actually continue to invest when the market's down, when
Speaker 1: it's volatile, when it's up and down, right, and it's
Speaker 1: I think randomly buy and selling can can lead to
Speaker 1: financial loss for people, but it can also lead to
Speaker 1: higher levels of stress. The results can be catastrophic for
Speaker 1: people in their retirement accounts, and it can also just
Speaker 1: raise their blood pressure at the same time. So it's
Speaker 1: important for people to make decisions before of all the
Speaker 1: market occurs, to kind of have that written investing plan
Speaker 1: in place, So start to make some of those decisions. Now,
Speaker 1: see how you've reacted to the current market volatility, and
Speaker 1: I think that can help you write your investing plan
Speaker 1: based on your own personal tendencies, right, And a couple
Speaker 1: of questions that you need to ask yourself are do
Speaker 1: I ever invest in individual stocks? And if so, how
Speaker 1: much and then when? And what are the metrics that
Speaker 1: you need to see in order to make buying that
Speaker 1: stock or or that e t F a smart move?
Speaker 1: Do you start to pour extra money into your four
Speaker 1: O one K and roth ira when the stock market
Speaker 1: dips to a certain point. You make sure that you
Speaker 1: have these things in writing so you can know exactly
Speaker 1: how you're planning to invest when the market does have
Speaker 1: a dip in particular, and that so much of this
Speaker 1: comes down to, like a rules based approach to investing,
Speaker 1: having a checklist or clearly defined process of how and
Speaker 1: when we buy and sell investments. That can help us
Speaker 1: to avoid irrational and exuberant decisions and can provide some
Speaker 1: consistency to our approach that can really be difficult to muster. Otherwise,
Speaker 1: it's really hard to stay consistent, especially in the face
Speaker 1: of uncertainty and difficulty, And so I think those those
Speaker 1: rules that you always follow and then sets of questions
Speaker 1: that you have to ask yourself before you decide to
Speaker 1: invest more are super helpful as we seek to become
Speaker 1: good long term investors that don't fret too much about
Speaker 1: the ups and downs of the market. That rules based
Speaker 1: approach can provide a good deal of clarity, and it
Speaker 1: can make it easier to follow through to continue investing
Speaker 1: even in a time where you are feeling uncertain about
Speaker 1: where the market is and where it's going. And at
Speaker 1: the same time, those rules can make it a whole
Speaker 1: lot easier on your brain to prevent you from thinking
Speaker 1: about all the possible what if scenarios, because there are
Speaker 1: so many of those. If you have your rules and
Speaker 1: your approach and you stick to it, it's it's just
Speaker 1: so much easier to continue going at that specific pace. Yeah. Man, Essentially,
Speaker 1: what we're talking about here is creating some routine in
Speaker 1: our lives, specifically in our financial lives. In our day
Speaker 1: to day you know, regular lives, we have routines. Uh,
Speaker 1: A lot of us wake up at the same time
Speaker 1: every single morning. We don't, you know, the night before.
Speaker 1: We're not looking at the clock thinking, okay, what time
Speaker 1: should I wake up in the morning. It's just it's
Speaker 1: kind of on autopilot. And so that's what we're talking
Speaker 1: about doing here with our finances as well. So for instance,
Speaker 1: like dollar cost averaging, this could be a great approach,
Speaker 1: a great rule for you. If you can dollar cost
Speaker 1: average into your FRO one k every single paycheck and
Speaker 1: also into your I RA every month, then you're going
Speaker 1: to be off to a great start. And then in
Speaker 1: addition to that, with excess cash that you then once
Speaker 1: invest you can ask yourself maybe a series of questions
Speaker 1: like well I need this money in the next few years,
Speaker 1: like do I know what I am investing in? Generally speaking,
Speaker 1: the simplier strategy is that's going to make this process
Speaker 1: far easier and so one of the easiest ways to
Speaker 1: simplify your strategy in your approach is to look at
Speaker 1: target date retirement funds, or just as easily you can
Speaker 1: look at total stock market funds or SMP five hundred funds.
Speaker 1: And we know that this approach has proven and it's
Speaker 1: effect and this is a way for for you to
Speaker 1: stick with something versus kind of constantly having to grapple
Speaker 1: with it mentally, right and so like on the other
Speaker 1: end of the spectrum, you might be asking yourself, you know,
Speaker 1: should I be investing in a sector that I maybe
Speaker 1: know nothing about. Recently, man, there's a story about a
Speaker 1: lot of folks deciding to start trading this cheap oil
Speaker 1: e t F on Robin Hood. But the fund actually
Speaker 1: it wasn't what they thought it was. They thought that
Speaker 1: they were buying actual barrels of oil essentially, but in fact,
Speaker 1: in reality, they're actually looking at futures contracts and it's
Speaker 1: much more sophisticated financial products, and it's it's not going
Speaker 1: to reflect the cost of oil, you know, Like folks
Speaker 1: thought that, oh, it's it's cratering right now, now now is
Speaker 1: the time to buy. I want to buy it low.
Speaker 1: But unfortunately they didn't do the due diligence to know
Speaker 1: that this wasn't actually the cost of oil. Uh yeah,
Speaker 1: it was on the contracts instead, yea. And then the
Speaker 1: e t F had to make fundamental changes to kind
Speaker 1: of how it did business, how it structured itself, and
Speaker 1: some of these individual investors, depending on how much money
Speaker 1: they put in, that that money could be wiped out.
Speaker 1: And and that's something that probably wasn't on a lot
Speaker 1: of their radar. Oh yeah, knowing your strategy, keeping it simple,
Speaker 1: not investing in a certain E t F or sector
Speaker 1: because you saw one hot tip or a story touting
Speaker 1: how great it was gonna be. That can a make
Speaker 1: it so much easier to continue to invest if you're
Speaker 1: going about it in a way that's just incredibly simple
Speaker 1: and easy to understand, and at the same time, it
Speaker 1: prevents you from investing in things that you don't really
Speaker 1: know anything about. So, Matt, one of my favorite financial writers,
Speaker 1: his name is Ben Carlson. He writes at a site
Speaker 1: called a Wealth of common Sense dot com. He wrote
Speaker 1: about how he's handling additional funds as the market goes
Speaker 1: through some volatile times, and he's got some stage advice. Man,
Speaker 1: It's important to note that not everyone is in his position, right,
Speaker 1: he's saved up enough money to tackle it in this manner.
Speaker 1: But we'll post a link to his plan in the
Speaker 1: show notes. It's pretty similar to kind of what I
Speaker 1: like to use as well. First, he's dollar cost averaging,
Speaker 1: and that's something that you just talked about, Matt. He's
Speaker 1: putting money in every single pay period or every single month.
Speaker 1: Basically he's taking time in the market off the table,
Speaker 1: and he's just doing it consistently, which is an excellent
Speaker 1: way to be an investor. And he said that his
Speaker 1: in frequent income goes directly into investments. So let's say
Speaker 1: he gets some birthday money or Christmas money out or whatever,
Speaker 1: he is going to put that money in the market,
Speaker 1: money that he didn't see coming. Uh, that infrequent infusion
Speaker 1: of cash, that's where he's gonna put it. That's what
Speaker 1: he prioritizes. And then he said he's ready to quote
Speaker 1: unquote back up the truck when the market hit certain benchmarks.
Speaker 1: And so he's got a certain amount of cash on
Speaker 1: hand that when the market does go down a certain amount,
Speaker 1: he's ready to to put that cash to use in
Speaker 1: his portfolio. And so, yeah, his rules based approach his
Speaker 1: clear definition of his rules is is so helpful in
Speaker 1: keeping the course and continuing to invest no matter what
Speaker 1: the market looks like. Yeah. Man, you know what's important here, though,
Speaker 1: is to define what your rules are, and so depending
Speaker 1: on your income and your savings rate, like backing up
Speaker 1: the truck, that could mean contributing maybe just a little
Speaker 1: bit more to your following k at work, it could
Speaker 1: mean maybe completely maxing out your wrath I ra A,
Speaker 1: or that might be investing even more in a taxable
Speaker 1: brokerage account. We still want to make sure that we're
Speaker 1: keeping enough cash on hand in an emergency fund. But
Speaker 1: then having rules, you know, in addition to that to
Speaker 1: guide you during uncertain times, it's gonna be really valuable.
Speaker 1: We talked about your plan a little bit. We talked
Speaker 1: about Ben's plan. Let's talk about my plancin. Oh you
Speaker 1: know me so well. Bitcoin and gold look at you
Speaker 1: all the way, but only physical goal that goes underneath
Speaker 1: your mattress, I like the actual bullion that you hold. Man.
Speaker 1: For me, I found it was really important to to
Speaker 1: actually write out a plan. So for Kate and I,
Speaker 1: we have a variable income, so we found that it
Speaker 1: was important for us to be super nerdy here and
Speaker 1: lay out some of these rules, like we're just like
Speaker 1: we're discussing and we did this years ago. So what
Speaker 1: that means for us is that at the beginning of
Speaker 1: the year, we try to fully fund and max out
Speaker 1: our roth iras as soon as possible. That doesn't necessarily
Speaker 1: mean that we purchase funds yet, but we make sure
Speaker 1: we go ahead and transfer that money from our day
Speaker 1: to day checking and savings account over to our brokerage company,
Speaker 1: specifically Vanguard. And right now, the roth Ira contribution limits
Speaker 1: are six thousand dollars, so it's really easy to chop
Speaker 1: that up into twelve months. You've got these little bite
Speaker 1: size piece is of five bucks. I love that. By
Speaker 1: the way, once they up the maximum to the six k,
Speaker 1: made it a whole lot easier for me to wrap
Speaker 1: my brain around that, right. Yeah, a year cap was
Speaker 1: so hard because you couldn't come up with an even
Speaker 1: amount that you would you put in every month. Yeah, man,
Speaker 1: I can't do that kind of math in my head.
Speaker 1: Exactly me neither. I like, I like the five dollars.
Speaker 1: So basically we know that every single month we have
Speaker 1: we have five hundred bucks to purchase some of our
Speaker 1: favorite retirement funds, specifically VOO like v o Oh, that's
Speaker 1: my favorite, and so like you, like Ben, every single
Speaker 1: month word dollar cost averaging. However, one thing I like
Speaker 1: to keep an eye out for, though, like Ben mentioned
Speaker 1: those benchmarks specifically, what I like to keep an out
Speaker 1: for is that if the market ever drops, you know,
Speaker 1: close to ten percent within a thirty day period, that
Speaker 1: means I'm not just gonna buy a single month's worth
Speaker 1: of vo I'm buying three months worth, So that means
Speaker 1: we're going in. So that doesn't happen often, but you know,
Speaker 1: maybe like once or twice a year or something like that. Um.
Speaker 1: But then beyond that, another benchmark is if I ever
Speaker 1: see the market get close to you on sale, that
Speaker 1: means we're putting a lot more and like closer to
Speaker 1: six months. And I can only really remember this happening
Speaker 1: like once or twice in the past ten years, where
Speaker 1: we were looking at buying six months worth of VOO
Speaker 1: right three thousand dollars. However, Man one other benchmark that
Speaker 1: we had never really set because this had never happened before.
Speaker 1: But recently, back in March, you know, the markets dip
Speaker 1: close to thirty percent and although we didn't have this
Speaker 1: written out to worry. Okay, any time in the market
Speaker 1: will drop by we will buy, you know, we will
Speaker 1: completely buy everything. We we saw this as a great
Speaker 1: opportunity because for us, in our adults lifetime basically of
Speaker 1: investing in the market, we've never seen a discount this dramatic.
Speaker 1: And we completely depleted the rest of the money that
Speaker 1: we had sitting there waiting to dollar cost average for
Speaker 1: the rest of the year because it was on sale
Speaker 1: so drastically. I will say, we were a little bit
Speaker 1: nervous and we still are because we don't know where
Speaker 1: the bottom is. We you know, it might continue to
Speaker 1: drop some more. But given the rules that we had
Speaker 1: laid out with ten, we just saw this as an
Speaker 1: extension of our rules. So because of that, we went ahead,
Speaker 1: and Man, we went all in. We wanted to make
Speaker 1: sure that we're taking advantage of the market being on sale,
Speaker 1: and we made the rest of our purchases for the
Speaker 1: remainder of the year, for the remainder of you know,
Speaker 1: it's good to have these rules set in place dollar
Speaker 1: cost averaging, but over the years, Man, I've also seen
Speaker 1: the advantage of there being some flexibility when it does
Speaker 1: come to making sure that you are able to purchase
Speaker 1: some of these funds while they're on sale. Well, it's
Speaker 1: interesting to hear you plan, Matt. Yeah, it sounds like
Speaker 1: it's similar to bend, but it's got a couple of caveats,
Speaker 1: so you know, yeah, again, I like to overcomplicate stuff
Speaker 1: over things stuff as well. Yeah, Well, we've got some
Speaker 1: other tips we want to share for people that want
Speaker 1: to take advantage of a volatile market, and in many
Speaker 1: ways it's gonna involve raining in your emotions. So we'll
Speaker 1: get to some of those thoughts right after the break,
Speaker 1: aren't Att. We're back from the break, and we're gonna
Speaker 1: talk about, yeah, the emotional aspect of investing in a
Speaker 1: volatile market. But the one of the main things that
Speaker 1: we need to talk about before that is the idea
Speaker 1: of rebalancing your portfolio, and that in particular can be
Speaker 1: a powerful thing to do in a down market. So
Speaker 1: let's say you don't have all of your long term
Speaker 1: investments in a total stock market index fund like Matt
Speaker 1: and I tend to do, or target retirement fund, which
Speaker 1: we also think is a great option. But you've got
Speaker 1: a mix of different funds, including stocks, bonds, maybe even
Speaker 1: reads real estate investment trust, which we've talked about on
Speaker 1: the show before. Well, based on the movement that we've seen,
Speaker 1: now is probably a really good time to rebalance your
Speaker 1: portfolio because your allocation has changed in a big way
Speaker 1: because of the volatility that the stock market has experienced, right,
Speaker 1: and so moving money from for example, bonds two stocks
Speaker 1: right now, it helps you get back to your former
Speaker 1: level of portfolio balance, like kind of how you had things,
Speaker 1: you know, maybe three or four months ago. Well, at
Speaker 1: the same time, it allows you to take more advantage
Speaker 1: of the recovery that's inevitably going to happen. So, yeah,
Speaker 1: volatile market times are a perfect time to think about
Speaker 1: rebalancing your portfolio and bringing that portfolio back into kind
Speaker 1: of that ideal alignment that you have, whether it's sixty
Speaker 1: forty stocks and bonds seventy thirty, like, however you think
Speaker 1: about it, make sure that you are thinking about rebalancing
Speaker 1: when the market is going through some tough times. Another
Speaker 1: perspective for us to keep in mind, to help us
Speaker 1: to keep from freaking outs when the market is supervolatile,
Speaker 1: is to make sure that we're keeping our retirement account
Speaker 1: in perspective right Like, so right now, we're just looking
Speaker 1: at the trees, like we are seeing the ups and
Speaker 1: downs of the market. We're seeing it tank not too
Speaker 1: long ago. But what we need to do, though, is
Speaker 1: to step back and see the entire forest. It is
Speaker 1: shocking to lose such a large portion of your retirement
Speaker 1: in such a short period of time. But Joe, it's
Speaker 1: also important for us to remind ourselves though, that the
Speaker 1: greater the risk, the greater the reward. And that is
Speaker 1: really important for us to keep in mind when we're
Speaker 1: in the growth phase of investing, right like, we don't
Speaker 1: need to be looking at our balances right now. Like
Speaker 1: I literally don't even know what my balances are right now,
Speaker 1: because it's not important. All I know is that I'm
Speaker 1: going to invest every single month. So Emily just got
Speaker 1: her four O one K balanced from a previous employer
Speaker 1: in the mail, and I opened it four and and
Speaker 1: kind of told her what had happened. And I told
Speaker 1: her that that her balance had dropped three thousand dollars
Speaker 1: because it's a pretty small for one K, there's not
Speaker 1: a whole lot in there. And she was like, what,
Speaker 1: Oh my gosh, it's terrible. And I was like, no,
Speaker 1: that's not bad at all. I told her how much
Speaker 1: I assumed mine had dropped because I haven't logged in lately,
Speaker 1: and she was like, oh, that's a lot too, and
Speaker 1: so she just starts freaking out. But really, when it
Speaker 1: comes down to it, I'm not freaking out in the
Speaker 1: slightest because I have a perspective of kind of the
Speaker 1: overall forest of what the stock market does throughout the years,
Speaker 1: throughout its lifetime, what the American economy tends to do,
Speaker 1: and so yeah, thirty percent drop in one month just
Speaker 1: doesn't really freak me out, honestly. But yeah, it was
Speaker 1: interesting to kind of get her take and hear what
Speaker 1: she thought about that three thousand dollar drop. That can
Speaker 1: be disheartening to see, I think when you open a statement,
Speaker 1: and for her it was, But that's the kind of
Speaker 1: thing having that sort of other perspective can make opening
Speaker 1: that statement a whole lot less dramatic and hard. Yeah,
Speaker 1: it's so important for us to zoom out and to
Speaker 1: pull back a little bit. Right. So, for example, stock
Speaker 1: portfolio was down roughly from the peak, like we you know,
Speaker 1: we're talking about earlier, not that long ago. But then
Speaker 1: stocks shot back up, right, but over the past ten
Speaker 1: years still take I'm going to account the most recent
Speaker 1: crash equity portfolio, so all stocks still have performs any
Speaker 1: other diversification strategy, and you're gonna be up a hundred
Speaker 1: and forty two percent over that same time period. Yeah, Matt,
Speaker 1: Like you said, the greater the risk, the greater reward.
Speaker 1: But it does come with volatility, even more volatility if
Speaker 1: you're less balanced and and more heavily invested in stocks.
Speaker 1: And I think one of the reasons that people are
Speaker 1: so hesitant though, to to continue to invest in times
Speaker 1: of volatility is because of loss aversion, and that can
Speaker 1: be a really powerful behavioral mechanism that prevents us from
Speaker 1: becoming good investors. Right, none of us want to lose money,
Speaker 1: and the surest way to not lose money is to
Speaker 1: not put any at risk. But that's not a great
Speaker 1: solution either. Right. We've talked about this on the show before.
Speaker 1: But because taking calculator risks is the only way to
Speaker 1: ensure that we reap inevitable future rewards. Well, when we
Speaker 1: let our aversion to loss cause us to sit on
Speaker 1: the investing sidelines, were actually locking in the greatest risk
Speaker 1: to our money, which is inflation. So yeah, people freak
Speaker 1: out about the potential for lost in this stock market,
Speaker 1: but you don't actually lose anything unless you sell your shares,
Speaker 1: unless you sell positions. And so if you're able to
Speaker 1: to stay invested and you look at that forest of
Speaker 1: what the stock market does over the years, well you're
Speaker 1: not gonna actually incur any sort of losses. You're gonna
Speaker 1: incur create gains. But it's that loss of version, that
Speaker 1: mental loss of version that prevents us from actually staying
Speaker 1: the course. Usually, Yeah, avoiding this perceived risk altogether, like
Speaker 1: that is the risk is move that we can make, right.
Speaker 1: We talked about this back in episode sixty nine. Investing
Speaker 1: in the stock market does have an element of risk involved,
Speaker 1: but it's just completely different than the kind of risk
Speaker 1: that you would incur gambling in Vegas. Like our friend
Speaker 1: five Am Joel likes to do once a year, was
Speaker 1: to go to Vegas. That's just what he does. I
Speaker 1: understand that. But keeping your money under your mattress like
Speaker 1: that is a sure fire away to make sure that
Speaker 1: you don't lose any of it. But inflation is going
Speaker 1: to steadily march on, ensuring that the money you stood
Speaker 1: away will lose purchasing power with each growing year. That's
Speaker 1: why investing, whether in a volatile market or not, is
Speaker 1: so important. So this kind of makes me think of
Speaker 1: Seth Goden as well. He talks about the lizard brain
Speaker 1: and how like we kind of have this prehistoric, you know,
Speaker 1: lobe in our brain that all it wants us to
Speaker 1: do is to be safe, to not take risks and
Speaker 1: just survive essentially, So like in prehistoric times that meant
Speaker 1: like making sure that we get enough food to eat
Speaker 1: and to make sure that we're not eaten by something else.
Speaker 1: But what that means for us today is that we
Speaker 1: just sit on our money, right, and we don't put
Speaker 1: it at risk, which is the exact opposite of what
Speaker 1: we need to do. So, like he talks about that
Speaker 1: in the context of like launching businesses and delivering products,
Speaker 1: taking risks, things like that, but it completely applies to
Speaker 1: investing as well, Like it essentially takes this sort of
Speaker 1: act of defiance to you know, actually invest, right, we
Speaker 1: have to quiet that lizard brain, and it takes action
Speaker 1: actually investing your money. Yeah, and and these are risks
Speaker 1: I would say that we're taking with our money that
Speaker 1: are based on a factual reality and historical reality of
Speaker 1: what the free market does, of what innovative businesses tend
Speaker 1: to do. And so, yeah, this is not just aimless risk, right,
Speaker 1: These are These are calculated risks, and so that's I
Speaker 1: think an important distinction to this doesn't have, like you said,
Speaker 1: any correlation to putting your money on the crafts table
Speaker 1: or at the roulette wheel. It's altogether different from that.
Speaker 1: And Matt, I think ultimately market volatility is the source
Speaker 1: of enhanced future returns for us. The overall American stock
Speaker 1: market has returned roughly nine percent over the past ninety years.
Speaker 1: In those ninety years have had their share of difficult events, Matt.
Speaker 1: If you go back and look at American history, there's
Speaker 1: a lot of tough stuff that happened over those years, right, wars, depressions, inflation, deflation,
Speaker 1: politicians of all sorts, of different stripes. And so while
Speaker 1: it feels a lot better to be buying as the
Speaker 1: market is rising, at least on our inn tives, right,
Speaker 1: it's like, oh cool, I keep seeing it go up.
Speaker 1: We'll know that American capitalism has continued to produce results
Speaker 1: for decades on end, despite real challenges in our face
Speaker 1: foreign enemies, uh wars on foreign soil. I mean, these
Speaker 1: sorts of things have affected returns, they've affected the stock market,
Speaker 1: but they've also created opportunities for people at the same time.
Speaker 1: So investing in an economic tailspan, although it feels a
Speaker 1: bit counterintuitive, I think it's the best thing that people
Speaker 1: could be doing over the long term. So at a
Speaker 1: minimum dollar cost averaging, right, that's the first rule I
Speaker 1: think that most of our listeners should be implementing if
Speaker 1: they want to be good investors through thick and through thin.
Speaker 1: And then you know, they can add rules onto their
Speaker 1: investing plan that go on top of that that help create,
Speaker 1: uh an even more efficient system for them to become
Speaker 1: an investor that invests in a volatile market and that
Speaker 1: is building well through thick through thin for the long term.
Speaker 1: And so I don't want to like discount all that
Speaker 1: we just said, but maybe the too long didn't read
Speaker 1: it is just keep investing like that. That's all you
Speaker 1: really need to do. Just make sure that you continue
Speaker 1: to put money into the market. Yeah, boil a thirty
Speaker 1: five minute podcast episode down into into like, you know,
Speaker 1: one sentence. I like it. It's probably should have done.
Speaker 1: We'll keep investing. Yeah, no matter what, whether things are volatile,
Speaker 1: things are down, it shouldn't be a warning flag to
Speaker 1: not invest. It should actually make you more excited to
Speaker 1: continue to do so. I agree, all man, let's go
Speaker 1: ahead and quickly take it back to the beer. This episode,
Speaker 1: we enjoyed a beer from Creature Comforts out of Athens, Georgia,
Speaker 1: and it's called Athena Paradiso. What were your thoughts on
Speaker 1: this one, buddy. As I said at the beginning of
Speaker 1: the episode, I love this beer. Lots of fruit, super
Speaker 1: fruit heavy out of those red tart fruits going on
Speaker 1: and and so yeah. I love kind of the way
Speaker 1: those fruits play together and kind of create a nice
Speaker 1: little medley. I'm gonna say it pours a nice pinkish
Speaker 1: red color. It's tart, it's fruity, it's just thirst quenching.
Speaker 1: It's a perfect beer, especially for summer, as we get
Speaker 1: closer and closer to the really warm months. I love
Speaker 1: a beer like this. I mean, I wonder if they
Speaker 1: choose the color on the can, uh, if they sample
Speaker 1: it from the actual beer color, because it is so
Speaker 1: spot on and like the colors of beer, it varies
Speaker 1: from you to year. But I feel like it's the
Speaker 1: exact same color this year. But yeah, so this is
Speaker 1: a German style wheat and so it's it's a wheat beer,
Speaker 1: but it's a super sour tart wheat ale. But then
Speaker 1: on top of that you add the tart, cherry, raspberry
Speaker 1: and cranberry to it makes it a lot more interesting.
Speaker 1: In particular, I like this year it had a lot
Speaker 1: more of that chair we're going on, which is really delicious.
Speaker 1: And yes, so we're finishing up my stock for this year,
Speaker 1: but but it's really good. Close it. Yeah, we'll glad,
Speaker 1: glad we get to share it on the on the
Speaker 1: show today, the last two until next year exactly. All right, man,
Speaker 1: that's gonna do it for this episode. For folks at once,
Speaker 1: show notes, well, they can get to our website how
Speaker 1: to money dot com get more info there. If you're
Speaker 1: listening to this episode and you have not yet subscribed
Speaker 1: to our show, we would ask you to go ahead
Speaker 1: and mash that subscribe button wherever it is that you
Speaker 1: listen to your podcasts. And then also if you've been
Speaker 1: a long time listener but haven't yet left us a review,
Speaker 1: we would love for you to head over to Apple
Speaker 1: Podcasts leave us a solid five star review over there,
Speaker 1: as that helps us to get the word out, help
Speaker 1: others to find our show who need to be doing
Speaker 1: smarter things with their money as well. Yeah, some people
Speaker 1: need some more encouragement, need some more help, and that's
Speaker 1: what we're here for. Yeah, buddy, all right, Well that's
Speaker 1: gonna be a dude. Until next time. Best Friends Out,
Speaker 1: Best Friends Out.