Crashes, Corrections, & Your Reactions #473

like how do we react? And um, I'm sure a lot of our listeners are are kind of wondering, well, yeah, when the stock market is tanking, like what should I be doing or how should I even be thinking about investing? And so we got a lot to cover today. That's right, man, But first I wanted to share with you. I want to here with all of our listeners as well, just a quick curb Alert score that I picked up the

other literally yesterday. So this happened yesterday. Okay, You're always finding weird stuff, so I'm curious, and so I mean here's literally I'm never on Facebook except for if I'm looking to sell an item. Kate's rarely on there, as well, but I guess she has some sort of alert set up so she knows when there's something that's going to be free. That is what we're looking for. This happened yesterday.

So one of our daughters, ever since she kind of graduated and moved up from like the toddler bed, she's just been sleeping on a mattress on the floor. And we, you know, a few months ago, even has to here like, hey, you know, do you want like a real, real bed, And she was like, no, I like it on the floor because she kind of just like rolls out of the bed and like plays with the toys, rolls back

into bed um. But honestly, lately it's kind of been a problem because she just has a lot of stuff just kind of scattered all around her bed, all on her bed as well, and so we've been keeping an eye out for a new bed. One came up on Facebook. It was free you know, side of the road deal that somebody was giving away and so I will know where they're picked it up. Specifically, it had drawers underneath the bed as well as like a headboard with some

shells built into it as well. And so that's all great, right, I'm sure you're probably down with that. Here's where it gets a little bit hairy. There's also a mattress that came with it, and so I wasn't planning to walk away with that as well, but I threw it in the van and brought it home. I want to know from you, do you feel that it is frugal or cheap to pick up a free mattress on the side of the road, And so I'm done the same thing

I have. And I literally actually just gave away a mattress, h an old mattress because I upgraded finally from used mattresses for my kids to like a new mattress for the first time in a long time. Or you finally gave for them. I think you finally gave away old bedbug mattress they were still but and yes, just gave it away to sweet neighbors who are who are very thankful.

But um, yeah, no, I am not against old mattresses, and I know some people would be, but I distinctly remember getting a used ikea bed with the mattress for my daughter. You know, I don't know two years ago out and there's a recurring pattern here. It seems like other people aren't willing to do this, but it's something that you and I are totally willing to do. In fact, I was with you when we saw that bed on

the side of the road. We're getting ready to go to a future islands, right, and we hadn't gotten far from your house, pulled over through all of the boards, the bed, all of it on top of were we in my car, like the old station wagon with with

like the wrap. We threw it on top of the car and like reverse it back to your house, took it inside before we hear I mean, really like everybody's got to draw their own line when it comes to frugal achieve right, And so so I think some people are gonna say I would these are discussed used mattress, you know, like mattresses or something that you spend you know, eight eight hours a night on, like you know, a third of your life is essentially spent on that mattress

more if you're a kid, your percentage wise, yeah, exactly, And so I get it. But at the same time, I think you're still sleeping on a used mattress. You and Kate are right totally hand me down. We finally upgraded to a Costco mattress I don't know, a year and a half, two years ago, and it's been lovely. But I say, our hand me down used mattress was totally fine. And also, yeah, well that's the thing. I mean, I'm not I wouldn't. I think it would be cheap if I was not willing to do it to myself,

but I did it to my kids. That's the thing, Like we want to be able to make some of these upgrades. But like in our case, like you and Emily were like, you know what, we're growing up enough, we're big kids. Now we're gonna we're gonna buy a new mattress. And we bought one of the online phone mattresses that shows up yeah puncture the bag and it

you know, inflates or whatever. We did not like that mattress, and so we tried it for a few weeks until finally I said, babe, we're gonna pull down the mattress that we shoved up into the attic. Uh. And I'm so glad that we did, because I wasn't totally sure if if we're going to keep that phone mattress. I was like, you know, I don't really, I'm not completely

convinced because it's a lot firmer. Obviously, it's not contort to my body like this one, like the old one is, since we've been sleeping on it for so long, and I guess whoever's body was is baked into that mattress. Now anyway, Well, I'm glad you feel the same way. Still, I didn't know if you had, you know, moved on in your ways. But obviously, like we looked at the mattress, there weren't any gross stains on it. It hadn't rained

or anything like that, and it was a neighbor as well. Still, like I picked it up off the side of interstate or something like that, I've forgotten run over a couple of times. That might be a different story, for sure. Yeah, you definitely wanted to make sure that it's still supportive and that it's not completely disgusting or something like that. But yeah, I'm okay with used mattresses and um and yeah, not everyone has to follow suit, but in our book,

it is frugal. I'm glad you're done with it. Yeah, all right. Alice mentioned the beer that we're having on today's episode. This one is called a Force for Good. It's an Imperial brown ale by Creature Comforts and Sierra Nevada donated to us by listener Nathan. So Nathan thinks, so it's right. We'll give our thoughts on this one at the end of the episode. But onto the topic of hand Matt. This one, we are talking about tick it off, the stock market crashes, corrections, and how we're

supposed to react in kind of turbulent times. And yeah, I was as I was thinking about this episode and made me think about that time. Um, you remember this a few years back when I got hit by a car when I was on my bike. I do remember. That is uh kind of frightening. I haven't actually really thought about it. We can laugh about it now, but at the time, remember Emily in particular, I mean I was upset. It was not I was like, oh no, but she was definitely a little worried about you. Yes, yes,

for sure. But one of my good friends recently relayed that he actually got hit on his bike with his son on the back. Fortunately, I just dropped my kids off at school and my kids were not on the bike when I got hit, but I I dropped my kid off as well, because that's back when we were doing the bike car pool and luckily both of our kids were off of your bike. Exactly I would have

been pissed and so not my fault. But but here's basically he, you know, my friend, he didn't get hit terribly hard, but I I got I got smacked a little bit, and um really just had like some shoulder damage for a couple of months, but I'm okay now and no long lasting damage. But what it made me think is is that like the lesson you take away from an incident like that, like, what is it? Um, is it that I should never ride my bike again?

Because there's a chance circle now there there's a certainty that I did get hit, but there's a chance that could happening in no. Mostly what I took away was like, helmets are great, and bike safety isn't worton, and that accident has happened sometimes, right, And so it's just that actually getting into that accident made me I had that

firsthand experience now, right. And so yeah, this recent bout of stock market volatility, it might have some of our listeners stocking away more money for their future, but I think it's been unnerving for others. And I think it's important folks if they're if they're especially younger, and they haven't experienced some of these bouts of market volatility, they've kind of seen the stock market just kind of going up,

it's been on its hair. Um, it's important for us to hopefully give them some reassurance, give them some guidance in the wake of kind of what's been happening, um at least you know since the beginning of January this year, that's right. Yeah, so we're gonna give our thoughts on how to react when the market is experiencing this extra turbulence, because yeah, you know, the same can be true when

it comes to investing in the stock market. Like we know that occasionally they're going to be corrections, but until we actually experience those downturns ourselves firsthand, just just like you didn't by getting hit with a car firsthand, and we're not totally sure how we're going to react until

we're faced with us situations. Uh. And so, just like when it comes to biking, we know that there's a chance we could get knocked off our bikes or run off the road by a driver, but it's a completely different thing to go through an ordeal like that ourselves just our emotions are feelings, they are a really complex side of our humanity, and we never quite know when fear is going to rear its ugly head, causing us

to potentially doing something that we wouldn't normally consider. Oftentimes, when we're not in those situations, we know the right things that we should be doing. But again, when we're thrust into those situations, when the quartosol levels spike, when we feel stressed and our emotions run rampant, that's when we can make those poor decisions, right, Yeah, I mean, I guess there's the there's the philosophy, the old school philosophy of getting right back on the horse after it

knocks you off right. And I actually felt really similarly about getting on back on a bike really quickly after my accident. I was like, the longer I wait, the longer I let it linger in my brain, the more

fear is going to build up. And I think the same is true for all for all of us, really, is that we have to when we experience something you know, difficult, potentially even traumatic, it's usually best to get right back on the horse so that we can mentally get accustomed to the reality that that you know, bike accidents don't happen every day, and so yeah, well, how do we get past this? Well, part of it at least is

we would say looking towards the past. You know, just like one bike accident doesn't determine how I think about the role that my bike plays in my life. I've had many hundreds of great bike rides since then. Neither does the last month of data, right, just the most recent sample size, right, because it's it's too small of a sample size to make decisions based on. And this

is a cognitive psychology term, and it's called recency bias. Basically, when we're overly focused on what has just happened as opposed to looking at longer term historical facts, reality on the ground for decades. We have to take in more data and we have to look at what else is true. That's a crucial element to not letting headlines and just incredibly recent market moves literally what happened in January right send us into a panic. To in the fuller picture,

not just this shortened time frame is really key. It's really crucial to helping us make better decisions. Yeah, it's right, you can't just look at that truncated timeline. And when it comes to investing, oftentimes, what this looks like is momentum. Right, we see the market on a t hair it's climbing, and we think it's never gonna stop, and so you continue to invest because you expect it to continue to

go up. Or on the opposite side of the coin as well, if you see the market tanking, you think, okay, well, I'm definitely not gonna invest now because the market is only going to continue to drop, and so we might be hesitant to get started investing. But once we are doing something, that momentum can cause us to continue to make decisions that may not be the best and this also can look like investing with our hearts instead of

investing with our heads. Right, when we let our emotions control our decisions, that's when we're bound to make more mistakes compared to when we use knowledge and data. So let's get specific here, Let's talk about some of the data. Let's look at what history has to teach us, because the short term it couldn't be more different than the long term. When we're talking about the stock market downward moves of five or timber actually happened almost every year

in the stock market. And seriously, a market that's down five percent from it's high that happens in of all years almost always literally, yeah, it literally almost always. Uh, and a tim percent drop that actually happens of the time, and so this is at least heartening. Downturns like what we have recently experienced actually occur pretty regularly. We shouldn't be afraid of those. Yeah, I think that is a really important thing to recognize. Is well, okay, it is

it's an aberration. Is this something something that's not normal that I'm experiencing. If so, I feel like I'm at greater risk. But when we know that this is a normal thing that happens regularly, almost every year, it can be really helpful from a mental standpoint. And man, I liking it to kind of uh, maybe let's say you're going in to get a shot, or you're taking your kids into get a shot. A you're getting the pep talk ahead of time that hey, this shot is gonna hurt.

So when they go in knowing that this shot is going to hurt, it's helpefully. It's supposed to help them to freak out less, right, like give them kind of like here, here's here's the scenario. Here's how it's gonna happen. Here's where you're gonna get the shot in your left arm right here, and like it's gonna be painful for just a minute and then it's gonna be over. You're

preparing them for this scenario. And if you just like sat them down and you didn't prepare them and you just jabbed a needle in their arm, though there's a there's a whole lot more likelihood of like an insane freak out right, And it doesn't mean that there's not gonna be tears, even though you've kind of um, you've told your kids exactly what's going to happen in this scenario and hurt. Yeah it is. And so but that warning and knowing the context for forgetting that shot is

is gonna help. It's gonna be helpful, and it's gonna prevent potentially even worst damage of of a kid freaking out by getting a shot in their arm without knowing what's coming. I don't want to think about that, like if you were to jerk your arm away like when you saw the needle, like getting ready to Yeah, I want to freak people out right to be some bad side effects. I guess the one thing is is if that if you were there and you can force your kids, right,

if they're freaking out and you can force them. But here's the thing. We are all adults. We have control over our own holdings in our own portfolios. There is nobody there necessarily to hold you down and keep you from from clicking that cell button. Right. Yeah, but I think that knowing that stock market drama is normal. Right, It's as normal as for as it being painful when

you get a shot, but quickly painful. And so yeah, as as we're looking at this historical data, right, as we as we know the truth going in to to

get that shot, it's gonna help us better absorb the shot. Well, I think it's gonna better be able to help us absorb something like what happened in January, where we saw stock market experience a whole lot of valatility um and we saw, you know a lot of people saw their their overall stock holding stop by something like ten percent, maybe more, depending on how heavily they were invested in let's say um tech companies, right, and so yeah, that was them getting a shot like it was painful, and

it does happen from time to time. But having that knowledge and knowing that this is for your ultimate good good is what you need to remind yourself of. Just like when we see these corrections, we know that ultimately these you know, this is going to turn around. Yeah, these corrections don't last forever, right, And so some some

of sometimes we do have a prolonged bear market. We might have multiple years in a row where the stock market is actually not gaining ground, where where you've actually lost money in your investments for multiple years on end. But most of the time, much of the time, we

see these corrections being actually fairly quick. I mean, take for instance, we see that I saw that drop in March, and how quickly did a rebound that was a V shaped recovery, and that was that was almost instantaneous, and so I I yeah, But looking to that history and seeing what's happened over the past decades, I think can can help you realize when you zoom out and look at the bigger picture, we can't expect the stock market to continue to go up even though there are setbacks

on the way, That's right. Yeah, And so we share this because past is prologue, right, These historical markers and data that we can glean from the past, they inform what we do today. Knowing the past, it can help you understand the present, and it helps us to make better choices. Uh, you know, while we're here in the here now. But simultaneously, you know, it is important to take that with a grain of salt, because who knows

what the actual future is going to hold. Uh. This is why on any prospectus that you see or any investment, they always say that past performance is not indicative of future results because there's no promise, there's no guarantee that your investments will continue to grow at least at the rate that you have seen them grow in the past.

But we are able to make informed decisions with the information that we have, and so we're actually going to talk more about making these informed decisions in the here now, and we're gonna get to that right after this break.

All right, now that we have some factual information about the past, now that we kind of see that these corrections are regular, they happen almost every year, and that a ten percent drop in the stock market like what happened in January, that's not that's an not abnormal, and in fact, that is more normal than not. Now that we have seen kind of some of what happens in the past, I think that can help us better assess

what's happening in the present. You know, we we believe that a big part of making wise decisions is just being informed. It's hard to make a smart decision if you don't have much information on your side. Right, That's where you can get lucky, But that is not a solid model or basis for continuing to make smart decisions in the future. Right. It makes me think about a recent dish washer purchase I had to make, and it was, you know, my my old one failed on me. And

I went to Consumer Reports, which does a great job. Basically, they just gather a ton of data from a bunch of people and then they provide rankings based on all this data they gather. And so it was clear to me reading the Consumer Reports rankings that a Bosch dishwasher was clearly the way to go, because they rank like

out of the top twenty. I mean, they're like ten of the units basically like the top ten, right, And so I was like, well, clearly, this is what I'm gonna go with and so, um, yeah, once you have some of that data, once you are informed, you can make a better decision because if you're flying blind, you know, you might pick the worst dishwasher on the shelf and

it might break in two or three years, um. And so yeah, to that end, we're going to define some terms real quick, because we try to avoid jargon on the show as much as possible. But it's gonna be helpful to know just a few things since they're going to come up quite a bit in this episode. And yeah, it can also be helpful to know some of these terms because we will most definitely experience all of these

at some point during our investing lifetimes. So, for example, if you don't know what a bear market is, then you might hear that term being thrown around and you might think it's the end of the world. You might be truly frightened or panics because you hear that term not knowing what it actually means. Or or you might hear someone say that the stock market is crashing, but in reality, what you're experiencing is just a correction. And so it might be other people misusing terms and knowing

what these terms actually mean. Is going to help you to filter out the noise from what's actually real exactly. Yeah, it can help you to create your own narrative as to what is truly happening. And so, yeah, Je, you mentioned corrections, So let's start with that. That'll be our first term. Uh, And this is when the market drops by at least ten percent, that is a correction. Once it hits that down by ten percent point, folks say

that the market has entered into correction territory. That tend to you know, nineteen point nine percent, I guess, uh. And so that's exactly what we experienced last month when the market dropped from highs early in the month down to where it bottomed out around January. And also it's worth pointing out that this isn't like an officially recognized definition.

It's what most folks are talking about. But at the same time, it's not a term that's like etched in stone where somebody, I mean, just like you said, some folks might be using this term to describe something else. And so it's helpful to understand what most people are referring to when they say correction, and it's helpful for you to understand what the market is actually going through.

I think that's actually a really helpful term as well, right, because when you a correction seems like something small but meaningful, and like, I have to correct my kids things all the time. It doesn't mean they're bad kids, but they still need to be taught to be civilized humans. So I think correct them on little things here and there doesn't mean that they're beyond repair. Exactly a little bit

of guidance, a little correction. That correction is part of, you know, helping them grow up into being better citizens. And so I think, yeah, a correction is kind of one of those things where it's it's a helpful term to know because that ten percent drop it doesn't mean that stocks or your portfolio are getting slaughtered. It means that there's just this like minor thing that happened. And knowing that a correction is a timber cent drop can

help you kind of mentally frame what's happening. And let's talk about bear markets too, because there's not like a government agency that's defined exactly what constitutes a bear market, but generally speaking, it's when the market sees the decline of at least from recent highs. This is obviously a much larger drop, and so of course we see we

see fewer of these. But in addition to the cold heart facts and the numbers that are associated with a bear market, oftentimes investors sent ament is pretty low as well. You know, naturally, if investors see their portfolio significantly drop, they're likely going to be bummed out. So a bear market can be a technical analysis, but it can also be used to describe how investors are are feeling. They're feeling lacks of daisical, they're feeling like their portfolio. It's

that overall investor sentiment. Yeah, and so yeah, it goes beyond just a correction. It's deeper than that. It's more significant than that. That affects not just the numbers on the screen you see when you log into to check out your investment account, but it also affects how people are feeling about the stock market too, exactly. When you use it that way, it's more of a squishy term as opposed to a quantitative, very measurable term. It's like, like,

how bad of the is the bear market? It's like, well, it's pretty bad. It's like, okay, that's not a very technical analysis, which is which is why I think people get confused about the terms, and because they are kind of confusing and they and there are a lot of people who misuse them, and so, um, I think we just have to do our best to know what's happening. And so, yeah, it can be hard to see the headlines when they're not necessarily reflective of what's actually happening exactly.

And obviously we're going to do our best to make sure that we are going to continue to be consistent when we use these terms, not only you know, during this episode, but just moving forward as well. Uh. And then so you mentioned the bear market. Finally we have stock market crashes and again there you know, there's not a super specific threshold here, because some folks will use that term to describe the market just as it's quickly dropping. You know, they might say, like, oh, the market has

down double digits, is crashing. It might be like a one day crash. It was down, it was like crash. Yeah, But from a again from a technical point of view, who we like to say that a market crashes when prices have dropped by at least thirty percent, so we get ten ten percent correction, bear market, the crash and This might sound super scary, you know, it might keep some folks from investing, but again, let's get back to

the data. In the past hundred years, the stock market has only experienced a crash of thirty percent or more during only ten percent of all years, So relatively speaking,

they're very rare. Although we did just you know, most recently experienced the Corona crash, and so attempting to avoid losing of your money in a crash that is going to be a bad reason to avoid investing in the stock market altogether, especially to when you consider that half of the worst draw downs that the market's experienced over the past nearly hundred years, half of them happened in

the thirties around the Great Depression. Yeah. Yeah, no, And it's interesting too when you look at things are a lot different than they were that long ago. Yes, yes they are. Our monetary system in modern society look a whole lot different than it did a hundred years ago.

But yeah, one of the things to note is that when when you have a teen percent draw down after the run up that we've seen too, it shouldn't shock people as as we've had essentially thirteen years of an unadulterated bowl run, which is another term I guess we we could define where the market has just continued to go up with with very few hiccups. And so it's like, if your favorite baseball player hits four hundred for the first two months of the season, the likelihood that they're

gonna continue to that. If if their final batting averages three sixty, it's like they's not a great season. Right, you shouldn't be bummed. That's still some good batting. Yes, I don't watch much faceball. You don't have some good slugging their slugger, I'll get talking to it. Three year old. I think, well, like maybe two or three guys have hit four hundred throughout a whole season, so it's like

almost non existent. But in those acts don't even count because of the Royds, Right, But some of those guys will actually will will hit four hundred for a month or two and it definitely makes a lot of headlines, but it's almost impossible for it to stay that way for forever. And so yeah, let's talk about maybe the present realities of the stock market and what's happening right now.

You're bound to hear at least someone say that it's different this time when we're in a volatile stretch, and some of those folks would encourage you to sell your stocks, would encourage you to convert to cash because of the coming apocalypse. We've talked about Robert Kyosaki. He is one of those guys who he's written a best selling book and he's given people a lot of good advice about money over the years. But on Twitter, he seems to always be predicting a market crash and he has basically

always been wrong. And so yeah, we would fund him elite disagree with someone like him who is saying, like, get out because the crash is coming this time. It's difference. And yeah, his history doesn't necessarily repeat, but it does rhyme as it said, And so we believe that nothing

is ever truly all that different. And that's the same old story man, right, And we've gone through when you look at the history of the United States and the history of the stock market together, we've gone through world wars and now pandemics, and we have gone through just so many horrifying world stage events. And at the same time,

American capitalism continues to chug along. And so yeah, in the moment, it can feel like everything's about to collapse, but staying the course is the thing to do, of course. And so yeah, one thing worth mentioning is that inflation is one thing that we're battling right now. And some people would point to that as a new phenomenon, but

we would say that's not the case either. It's not that as new, it's just it is, you know that all time highs, the highest has been over the past forty years, probably the highest has been since any of most of our listeners have been alive, right, Yeah, inflation is at something like seven percent right now, where we've been used to seeing it between one and two percent.

And although there are some people listening to this podcast who have been alive long enough that they remember the seventies and eighties where inflation was basically out of control, ramping like the average was seven percent, like not just you know, one one marker of year year over year at seven percent where we hit it for the first time. Literally it was like the average over like a couple of decades. We're experiencing like a blip in inflation, especially

when you compared to that. But for us, for for many of us, for many of our listeners, this feels like something abnormal, something new, but it's important to remember that it's not, and that this is something that we as a society have experienced before. Yeah. And the other thing too, is just because inflation is up, that doesn't mean that we're not going to see good returns from

the market in the coming years. Right. So the friend of the show, Ben Carlson, he loves his data, and he actually crunched the numbers on inflation in relation to market returns and there is no clear pattern. And so the volatility that we're experiencing today in the market, it's likely not being cause by inflation. You know the reason, you know why this is happening. This, this volatility is

something that gets talked about ad nauseum. Everyone's got to take you know, whether it's the Fed raising rates, like that's why it is. Everybody wants to sound smart and be like this is why stocks are suffering, or maybe like some folks were like, oh, it's you a political right, it's Russia, it's Ukraine. I mean maybe, like maybe that's the case, but the stock market is incredibly complex and it's really hard for us to point to a single root cause for how it is that the market is

reacting on any given day of the week. So what are we saying. We're I think we're basically telling you not to worry about volatility or inflation from an investing standpoint, right, And there might be some listeners who are thinking easy for you to say, you've got years, even even decades to go before you have to start selling investments, which which is true, Matt, Like you and we are in our late thirties and and hopefully we won't be tapping those uh four o one case for decades to come.

But yeah, your timeline is an important thing, an important part of this conversation, and when you need to draw on funds absolutely has an impact on your approach to a market town turn. And so when you're younger, as most of our listeners are, they are in their twenties and thirties, you should see the market plunging and immediately

equate that too. When your favorite store is having its annual sale, like if you're in your twenties and thirties, you should be buying more, loading up on those off sneakers or sweaters or whatever it is. And so basically, yeah, you knew you were going to get some new sneakers at some point this year, and if you hadn't already purchased them, it's like, all, right, now is the time?

Why not? Yeah, you get when the getting is good, sunshines exactly all those phrases, and so, of course it's a it's a tougher pill to swallow if you're no longer in the wealth building phase of your life. But we would say that's why the portfolio that you have you need to be able to stomach these downturns, and especially if you are in your fifties and sixties, if you're getting closer to that age where you're gonna start drawing on those retirement funds, your portfolio can and should

reflect a real risk tolerance that you have. Most folks in the wealth preserve a stage should not have exposure to stocks because it puts them at too much, too much risk to their actual money, but also the emotional risk that comes alongside of that. When you can see your portfolio in like literally one month dropped by six digits, like that's a scary scenario when you're getting closer to the point where you're gonna need that money, so you have to be careful and make sure that how you're

invested reflects your specific situation. Although you could easily argue that the best way to preserve your money is by growing it, right, Like the best defense is a is a good offense. That's another sports reference, is that baseball

as well? Well? I think that's true. But like, let's say you're you're retiring next month and you're you know, you need to make sure that your portfolio could withstand what we just called a bear market, right that if if the stocks went down, you probably don't want your portfolio going down, and so you need to be more conservatively invested to make sure that you can handle just an eight percent correction or something like that instead of

that full on twenty percent correction that folks like you and I are willing to experience. Exactly, And this is where psychology in our behavior is so much more important than understanding the fundamentals of how to invest. And so let's let's talk about why we should be optimistic about the stock market. Uh. Tyler Cowen, he had a great article about why American pessimism how you know why it

doesn't extend to short selling the market? Uh? And basically he argued that if you know you've got a pessimistic viewpoint, if that was your actual long term point of view, you would likely be making some drastic moves right now, like selling off most or all of your stock portfolio, or maybe just like holding short positions in the market in order to make money since decline is inevitable in those pessimists opinion. Right. But the thing is is that

those pessimists, they rarely go to that extreme. The best line from that article was that apparently selling previously acquired assets and lost too much work even with a pending apocalypse, which isn't I mean, it is so true because if there truly is opending apocalypse, you do the work, You take the steps necessary to basically reinforce what it is that you are saying. But the fact is there's a lot of people saying that, but they don't truly believe it.

I try, you sell out of stocks and then you go to Costco and you buy one of those like you buy a prefab bunker food supplies, you know, like hunker down exactly if you really believe that. Yeah, And there's a lot of people who will tweet pessimistic thoughts, that will write pessimistic headlines, but it comes to how they handle their money. They're not changing very they're still investing. Yeah, yeah, exactly.

So it's not that pessimism is never warranted, but they just won't take you that far when it comes to your investing journey. You need to stay in the market. Makes me think of literally one of maybe my all time favorite money quote from Morgan Household. He said, save like a pessimist, invest like an optimist, And I think that is always true because you should have cash on hand, right,

that's what your emergency fund. And then on top of that, you're the money that's in your savings account is supposed to do, supposed to help you get through those times that you couldn't have planned, times where you do lose a job or a transmission goes out on your car. Investing, though, like,

you should pay less attention to the headlines. You should invest like an optimist, and you should continue doing so because ultimately that is what's going to make you wealthy's And so yeah, there's this Jack Bobble quote math that's worth sharing here too. And we got a lot of quotes this for this episode, as we do. And he said,

Jack Bobble. Obviously, he's the founder of Vanguard, which is a low cost brokerage firm who we think are are wonderful and we encourage people to look to Vanguard as one of the places where they might invest their money. He said the stock market is a giant distraction to the business of investing, and which sounds like a paradox, right, because obviously the market is incredibly necessary in order to invest.

Like it literally, it's called a stock market. It's it's a market that you go to where you invest in stocks. It's like going to a meat market. You want to buy meat, you go to the market. You want to buy stocks and invest, you go to the stock market. But yeah, obviously he's talking about the volatility that can so often distract us from our ultimate goals. Yeah, exactly, exactly where where we just get to beholden to what the prices on a given day or the percentage draw

down in a specific week. And he's saying that like that is the stuff that is going to prevent you from being able to actually take it vantage of the wealth building mechanism that is the stock market. It's just it's just too easy to get pessimistic when stocks are falling to see all the negative potential that the upcoming weeks and months could hold, that a war between Russia and Ukraine and then the US getting involved could potentially present.

But we have experienced worse in you know, in our in our history, in the history of the world, and in the history of our country. And so yeah, let's let's take that pessimism with a grain of salts um. And so yeah, really you should be looking more towards future potential for those dollars to grow, not kind of what's been happening in the past month or even the

past year or two. And so yeah, if you're casting your gaye decades down the road, it's gonna help you develop real optimism in the present as opposed to taking on the identity of all the pessimistic voices that are kind of predominant these days. All Right, So we've covered a lot when it comes to like definitions, when it comes to kind of how you should think about staying

the course the mindset. Yeah, but but there's there's more we have to get to you mat so that how the money listeners can be successful investors, not just now but well into the future. Some guidelines some pieces of advice that they should cling to, uh, in order to continue building wealth. And we'll get to our thoughts on that right after this break. All right, we are back from the break, and you know, we kind of broke this up into what's happened in the past, what we're

experiencing right now. It is now time to talk about the future in the year. It makes me think about that old Conan O'Brien's kit and now it's two where the flying cars man? Right? Uh? So, yeah, that's that's what we're talking about now. Like what do you do now? Like where do we go from here? Staying the course We believe that that is the best option, and it's

not even close. There are, of course going to be some folks who are nearing retirement, like we said earlier, who would benefit from taking some money out of stocks and having a less risky portfolio overall. But that shouldn't be in reaction to what the market is currently doing. It should be in reaction into the reality that you're just getting older. Right, is this innevitable process that we

all go through? Uh? And you are drawing closer to retirement, uh, and so for you than maybe rebalancing and coming up with a different plan is what you need to do. But it's not because of what you are currently experiencing with the market. And so for virtually everyone else, sticking to your current strategy, even in the midst of market corrections, uh, bear markets, or even crashes, that is the right path to take from here, that's right, Matt. Yeah, one one

helpful article from seeing in Business. I really appreciated the headline this past week. They literally encourage folks to forget their four own K password, and I was like, that's really good advice because there's probably a lot of people logging in there right now. They see a bunch of red on the screen, how much money they are down in the past, in the past weeks or month, and they're wanted to do something, and so maybe not logging in is actually the best thing for you your psyche,

but then also the best thing for your investments. And so yeah, we would suggest that that's accurate. Uh, don't log in and look at the numbers and um at. It kind of reminded me of this fabled Fidelity study that didn't actually happen, which supposedly found the people who had the best investment performance were dead. Do you ever hear about that? Yeah? Okay, but apparently it's not Actually

it was not a real study. Yeah, even if you could run a study like that, which I mean, how many dead people are there, whether their accounts are still growing where probate hasn't kicked in and right and government hasn't swooped in or whatever. But like, even though it's a fictitious study, like if you take the facts and run a study like that like a hypothetical, it's still true exactly, which is just kind of fascinating to see that.

You know, not making changes in times of turmoil is of course easier if you don't have a pulse, right if you're dead, because you're not susceptible to the whims of the market or the headline writers. But I think it's you know, a good thing for us to remember that when we are experiencing abouts of volatility, it's best to kind of think like a dead person. Really, maybe that should be our new slogan. Invest like you're dead. It's like we can we get a burden's right, prop

yourself up, party like you're dead. One other thing to mention here, too, is the great thing is that most how the money listeners are probably going with the dollar cost averaging approach to investing, and that's when you're putting money in regularly, you know, often like every two weeks, whenever you get paid. The excellent thing about this is when these dips do happen, you are buying stocks at a discount without even having to think about it. Right,

it's automatic ensure. Right, your portfolio has taken a bit of a hit. But since you're buying more stocks while prices are depressed, it creates more of a benefit for you over the long run. That's dollar cost averaging. However, if you find yourself in a situation where you have a lump sum to invest, we wanted to mention that the data shows that it makes most sense to invest that money as soon as possible because on average, the market grows more often than a shrinks. And so just

keep that in mind. If you are dollar cost averaging, as the market tanks, you're getting a deal. But if that's not you, if you do happen to have a chunk of cash sitting around, don't overthink it. Invest that money as soon as possible. Uh, time in the market always is gonna beat timing the market. Yes, yes, it will. It's a classic old phrase. I don't know who said it,

but I don't know. Pretty true, I like it. Yeah, And uh, the weird thing, Matt, is that, for some reason, when the stock market seems to be the only place where people run for the exit when the sales starts, when Amazon Prime Day comes along, everybody should be shopping on Amazon. Nobody's freaking out. No, everybody's loving it. And let's say you're saying, oh, the value of my air

air fryer just went down in value. Thinking about it from this day point, you know, they're like, yeah, I'm gonna get three air fryers because they're cheaper than they ever were, and I'm gonna start stocking up for Christmas gifts air friers for everyone. And but it's interesting how the exact opposite thing happens in the stock market. And and so, yeah, the crucial thing to remember is that

you don't actually lose money unless you sell. It's just numbers going down on a screen until you turn the abstract into reality. So when you're faced with the correction or a crash, don't lock in those losses by selling it. The exact wrong time to sell. At the same time, don't assume that it's a bad time to buy as things are going down. But think of it just like

Amazon Prime Day. But for your investing future, for the future of your stockholdings, of of your ultimate wealth building goals future, you is who you want to keep in mind when it comes when the markets taking buy those stocks on sale for Yeah, and the thing is, you don't get big gains without volatility, right Like, if you like certain do you just stick his savings accounts c d s. Those have obviously not been kind to your dollars recently, but there's a real purpose behind having savings

on hand. But you've ultimately got to take risks if you want to earn returns on your money. And I think one more important thing really worth mentioning is some people might need help. Some people might feel like they can't go it alone or might feel to disheartened by stock market corrections where they feel like they have to take a move because it's a frightening scenario. And yeah, if you're final full, you don't feel that way. Because

you're listening to this episode right now exactly. We're kind of trying to be your coaches like podcast, but if you feel like you need an actual human being can personal trader, yeah, where they can actually like look at you in the eye and talk to you about how

you're feeling. Well, that that person would be a financial advisor, and that can make sense for some people, Matt who you know, financial advisors aren't cheap, but they're definitely cheaper than selling at the wrong time, right and so uh, if you know yourself and you've toyed with the idea of selling, let's say in the midst of recent volatility, hiring someone who can help you develop and stick to

a plan can be well worth the cost. X Y Planning Network is one of our favorite places for folks to start if they feel like they absolutely need an advisor on their side and they can't go it alone. We think you can invest without the help of someone else in order to build wealth for your future. But if you are getting nervous and you don't think you can well, then that might be the time where you need to hire someone who can come alongside you and

help ensure that you stay the course. And that person is in all likelihood going to be a financial planner or even somebody like an accredited financial coach. That's right. You might know yourself really well and know that someone like that guiding you you through some turbulent times would be completely worth it. It's like a higher NASA. You might not need one, you might be able to get there on your own, but you might also find that

you in particular, that's something you need. Yeah. Plus it probably doesn't hurt you know it stice having some company on the road on the path up Mount Everest. But you know, I mean at the end of the day, like discipline, the ability to endure a risk, these are the things that you'll need to develop as an investor because the stock market it doesn't always go up. It's not just a high yield savings account that pays, you know, like a hundred times more than what your bank is paying.

That's what people started to feel like though the last like ten twelve years. Yeah, and it's understandable too because like a lot of young professionals who started investing in twenty ten or later, Uh, they've only for the most part seeing the market just on the rise. But it is important to know that corrections occur regularly. Aside from you know, the novel global pandemic that we experienced back in that took the markets down. But bear markets, even crashes,

they're going to pop up every now and then. But if you know your risk tolerance, if you know your timeline, you don't have to spend much time or energy thinking about it. Yeah, again, going back to corrections, bear markets, they're gonna happen regularly. They're gonna happen enough to where you shouldn't freak out when percent of the time so happen.

If you know that those things are headed our way, um and that they're inevitable, I think it's gonna help bolster you to continue to make the right decisions even when tough times go along. And the cool thing is when those tough times come along, you're able to continue buying more and in fact enhancing your ability to grow

your wealth for your future. So that's actually the best way I think to think about these these corrections is to steal your resolve and then also continue doing what you were doing, continue buying more, but because it's only going to put you in a better financial position in the future. All Right, Matt, let's love it. Let's get back to the beer that we had for this episode, which is also love. Yeah, this one's really love investing and I love the What is this called doing good?

A force for good? A force for good? Yeah, which is a great name for a beer. And this one came from two breweries that you and I really like, Creature Comforts and Sierra Nevada. This was an Imperial Brown Ale. What were your What were your thoughts on this one? Well, I will tell you, but first I wanted to mention. So, yeah,

this is a collaboration. Uh. And it's called a force for Good because one of the profits from this beer go towards charities there in Athens, Georgia, And so it's always nice to come across the beer that also has a good mission. But yeah, so this is a rum barrel aged beer with am Burana would, which I believe I remember reading was a Brazilian would. Uh. It's first aged in Jamaican rum barrels, which obviously you can totally smell.

As soon as we poured this beer, it smelt like we were I mean, it smelt like we had like a little sniff ter of Jamaican rum. At least it did for me. Yeah, no, I agree, incredibly strong from that standpoint, it definitely picked up a lot of those rum characteristics but then aged on whatever exotic would This is from Brazil, but it gave it this incredibly rich depth of this umplex flavor profile for a style of

beer that we don't often have here on the show. Jill, this is an Imperial brown, and so it has a lot of those dark qualities that you get out of the stout, but with some nuance, right like kind of like a almost picture like a brown oatmeal cookie with raisins as opposed to kind of like dark chocolate and roasted coffee, which is typically what you get with like a Russian Imperial. But it's a nice way to incorporate some of those flavors without completely going off the deep

end when it comes to kind of the roasty toastiness. Yeah, no, I agree, And and I think it had a lot of like rum sweetness going on to write it was, which I know you're not a huge fan of. No, I like, I like rum, and I don't mind some sweetness, and and honestly, like I love a good brown ale, but there aren't many great ones being made. There's aren't many brown ailes out there in general. Needs to happen more.

I feel like brown Ales were like probably you know, one of the absolute first craft beer styles that I got into. Now with ip as being all the rage, they don't make this kind of nobody makes them. They've kind of taken over. Did you ever drink I think it was called turbot Dog by a Beda. I'm sure I did. That was like a beta back in the I mean, they probably still do, but they have like

Purple Haze and some of these other beers. But Turbo Dog was a beer when I once I graduated college, I was living with a buddy of mine up in North Carolina in the woods. That was a beer that I found myself gravitating towards. Uh, And that's when I discovered shower beers, and so I would have a I

would have a nice Turbo Dog. They're up in the mountains of North Carolina with snow on the ground outside, and we would crack open the window to our There's an actual window in our shower and you could open it up and literally see the snow falling. I'm in a hot shower and I've got my cold beer. It's kind of like the perfect and the perfect mix, like the simple pleasures in life, right, there, man, everybody needs

a good shower beer every day. And then yeah, well I would I would say I think this one was truly great beer from two great breweries, and I'm so glad to have another Brown Ale because yeah, it's like a blast from the past. But this is like way better than the Brown Nails I was drinking when I was like, I don't know, like ten years ago. So the Rednols would use a drink or like, you know, they got their high school diploma. This Brown Hiles got

like his PhD. It's a whole another level exactly. Yeah, but huge thanks to friends of the show Nathan for picking up some of these and sending them our away. Thank you, all right, Matt, that's gonna do it for today's episode. For listeners who want more information about this episode and just kind of more information about what we're up to here at how the Money, you can check out our website at how to money dot com. That's right, man,

and that's gonna be it. So until next time, Best Friends Out, Best Friends Out.