Investing In a Volatile Market #200

That's right, man, we are talking about investing, And honestly, before we even dive into this, I feel like it's worth mentioning how we understand that not everybody is in a position to where they can invest lots of money right now in a volatile market to take advantage of these downswings that we're seeing and so, but but that being said, there are a lot of hang ups that people have when it comes to investing in the market when there are lots of fluctuations, and so that's what

we're gonna talk about today, Werena. We're gonna talk about how to actually go about investing in a volatile market, as well as ways that we can kind of control some of our emotions as well, because honestly, isn't that the biggest hang up that we have? Like we know what we should be doing, but are emotions that keep us from doing the right thing. So I'm excited that we're gonna talk about that. How do you control your emotions? Matt,

I bottled them up, I tamped them down. Uh, and then when no one's looking, I just break something off the corner. Watched, like, where the why is this dish broken? I don't have no idea how. I don't know what happened. Yeah, I don't know. These are randomly breaking all around the house. And that's one way. Yeah, that's one of the Hulk method. As Kate and I have been catching up on our Marvel movies as you know, yes, yeah, I know, I know. Yeah,

you've been doing that all right. Yeah, Well, I'm looking forward to to tackling this topic Matt and there. Yeah, there's so much to say for people in all different areas of their investing lifetime. And I think in particular for our listeners who are younger, the ones who didn't necessarily go through the Great Recession. They were in middle school or high school or something like that ten years ago, and they didn't have any sort of money on the table.

They weren't investing at that point in time. Well, this feels like new territory for people like them. And so yeah, I think it's important to address this topic for sure. But before we get to that, Matt, you recently got scammed on Facebook marketplace, got scammed? How much money did you lose. No, I did not get scammed. So previously, we know we've talked about the stimulus money, and you know, I we we discussed what we should do with that

stimulus money. How some of that money, maybe ten percent, it's good and even healthy to spend on yourselves as a sort of splurge. And I mentioned treat yourself exactly, treat yourself. And I mentioned that I was looking at a bike. Well, I got my bike, by the way, I got my Salsa Journeyman, which is a sweet bike. I'm not being paid to say this. I love it that much. But I did want to be responsible, and so I made sure to sell a bike. You know, we kind of have a little bike shop going on

in our in our basement. So I listed that bike on Facebook via the marketplace, and it went within a day or two, it was gone. And I am on top of that kind of stuff, and so I marked it as sold, right, And so that's how I knew that when I received a text message on my phone that said, hey, is this item still available? And it

had a Facebook link to a marketplace. You know, you could see it in the U R L. And I almost clicked it, but I thought, wait a minute, that listing shouldn't be live at all, because I remembered that I had marked it a sould right uh, And so I looked at the u r L a little bit closer, and I saw that it was not a legitimate Facebook u r L. I thought it had like a subdomain going on, because it had like secure what I thought

was a dot right. I thought it said secure dots Facebook dot com or whatever, but in fact it had a dash, which means it is not a subdomain. It's a separate u r L actually, or specifically, it's a subdomain, but not a Facebook of some fraudulent site. So I was that close to actually clicking that link, but I was a little curious to see what they would say, and so I did reply back, and I was like,

what's the item? Obviously I did not hear from them after that, but I wanted to mention that because a lot of us have experienced with scams via Craigslist, but this is the first time I had ever received a scamy right or a spamy message from a Facebook listing. So I wanted to mention that just to make our listeners aware that make sure that you're being careful with you know, with the links that you're clicking, even if

it's a message through Facebook. I mean that link could have been, since I'm guessing, through messenger or something like that. But the fact that it was sent to me outside of Facebook via text messages that definitely raised a red flag. And so a lot of folks might be in a similar situation as me. Just make sure that you're being careful. Yeah, man, it's like, I don't know, four or five months ago, I saw Consumer Reports wrote an article on, you know,

the expansion of Facebook messenger scams. They've really really proliferated. So that's a that's a good warning, and I'm glad you didn't click on the link. Who knows what sort of personal info they're trying to mind or And I feel like too. Right now, the scams are just abounding, with coronavirus, stimulus checks, p p P loans, They're just all sorts of scamsters trying to get in the mix.

It's highly unfortunate. It's terrible to watch. But we have to look out for ourselves and be careful not to click on errant links and not to have conversations with people that we don't know at all. And yeah, so that's a good warning to to share with people. But yeah, I didn't get scammed. I wasn't gonna give Janie any of my information. Well, Jane, it's that's a classic scammer name too obvious, so obvious. Sorry to any listeners out of their name. Chance. Alright, ma, let's talk about the

beer we're having on the show today. This is a Theena Pair dso from Creature Comforts Brewing Company. They're right around the corner from us in Athens, Georgia. This is a fruited Berliner Vice. It's got cherries, raspberries and cranberries in it, and I'm looking forward to having this one on the show with you today, my friend, man, this is a seasonal beer. This is something that they really,

I guess, pretty much every spring, like early spring. And this is one that you picked up recently to donate to the show, So thank you, Joel. Well do every spring. I ended up buying like three six packs of this one because I love this beer so much. A good one. So all right, we'll talk about that one at the end of the episode. But I think people know I'm gonna like it, all right, Matt Well let's get onto

the subject at hand. Today. We're talking about investing in a volatile market, and volatile markets in particular bring out the worst in investors, or they can bring out the worst in investors, because we're Austin guilty of overreacting to the good news and the bad news alike. If the news is good, we get invigorated and we think it's going to continue to be good, and if it's bad, we get pessimistic and it's hard to looking at the

future and see when things could turn around. Right. So, investing while the market is experiencing volatility like he is right now takes some amount of nerve on our part. Right people are out there selling off their steak in particular companies right now for a reason. Some sectors are suffering in a big way right now, like, for instance, who knows how long airlines are going to suffer profit

declines because of COVID. Are people going to continue to fly in the same way even as restrictions continue to get lifted in different cities and parts of the country. Is flying ever gonna be the same That's kind of question that investors have to tackle right now, and that's why some of the airlines stocks have had a massive hit, and it's important to note that the market is more volatile based on a confluence of factors at the moment too,

many many of which are based in economic reality. That lots of American businesses are going to have a tougher time moving forward because of the pandemic we've experienced. But as long term buy and hold investors, Matt Right, buying in a down market is crucial to our wealth building efforts. It's something we have to do, we have to get comfortable with, and that's why we felt like we really

had to cover this topic today on the show. Yeah, I guess you know, it's sort of not unlike us having to get used to living with COVID nineteen as as part of our lives now. But I agree man, continuing to buy and hold they are both far more difficult to do in a volatile market for most investors. And then on top of that, when we hear terms like bear market and recession and being thrown around, it makes it even harder for many of us to to

continue to invest. But it is crucial that we continue investing when the market is in a state of turmoil because it can give us a big boost to our overall net worth. You know, it is, as we've said before, buying a stake in a variety of American businesses on sale. And although it always feels good to buy, you know, a consumer good, maybe an item of clothing or a new bike like I just got at a steep discount, we have a much harder time feeling good about buying

stocks that are on sale, or even buying them at all. Yeah, it is amazing, how the inverse is not true. How that's the one thing in our lives that we have the hardest time buying on sale is is the American stock market or the world stock market, but almost anything else, we're like super pumped. Yeah, so true man. Uh. But still, it's so crucial that we do this, and this has a big benefit to our future self. Yeah, for sure,

it totally does, Matt. I was impressed to you. I I recently saw a study from Vanguard that showed that a majority of Vanguard investors in particular didn't make any changes to their portfolio in in the recent wild down swing, in particular in decline that mostly happened incredibly quickly in March,

and of us Vanguard investors stayed the course. They weren't doing any buying or selling apart from their regular dollar cost averaging that happens out of every paycheck, and so that was pretty cool to see, right, Vanguard investors might not be the norm, though I haven't seen more studies necessarily showing that customers of other companies are doing something differently.

But but Vanguard investors are by nature because of the founder, Jack Bogel and his philosophy in buying and holding, they are probably a little different than the average person. I mean, Vanguard investors in particular subscribe to that Bogel uh investing philosophy where you buy for the long haul, and you buy super diversified funds yep, cheap index funds that are widely diversified. And there's even people, Yeah, the Bogel investing philosophy man has taken on such a life of its own.

There's a website called Bogel Heads, and they're basically these followers that are so in love with Jack Bogel, his philosophy, what he started. That there are forums where people discuss how great it is. But I think we can learn from those investors. Right that the resolved to do very little or nothing in a market like this where they are willing to stay the course even in the midst

of a lot of turbulence. You know, what's important here is that they didn't do the biggest sin, which is actually sell some of their portfolio as the market was going to decline. Because on one hand, this seems like good news, right if investors stayed the course, that means they didn't lock in those losses by selling. But on the other hand, maybe this is bad news, right, Like there are a lot of missed opportunities if you didn't purchase more funds during that recent plunge in the market.

A lot of this depends on your temperament and your ability to withstand losses, and it also depends to on the phase of investing that you're in as well. Right, if you're in the growth stage of investing, you're gonna be able to withstand some of these turbulent times, right, because the more turbulence you experience, that means you're exposed to risk, and that risk is crucial when it comes

to growing your portfolio. But if you happen to be in the preservation stage of investing, it's it's a lot tougher, So whether these ups and downs like that as you're drawing on that money, as you have a need for your portfolio where the there's also a big difference in seeing an actual numerical decline. Let's say the same investor at age twenty five at age fifty five have the same exact allocation in a total stock market fund, but one has been investing for thirty more years. They've got

so much more at stake. A twenty five year old has been investing probably for two or three years in all likelihood, and the fifty year old has been doing it for close to thirty. So there's something psychological about seeing a massive number drop, even if the percentage is the same amount. Right, Sure, Yeah, I'm sure seeing a drop on a million dollars feels a lot different than percent drop on ten thousand dollars, even though, like you said,

the percentage is the same. Yeah. Well, before we get into the specifics on investing in volt the mark it, I want to quickly talk about kind of some investor sentiment right now, in particular individual investors like our listeners, like you and I. There is kind of this belief to a certain extent that the stock market is ignoring reality.

The bear market obviously happened really quickly. Stocks took a pretty sharp rebound, and despite a lot of hard unemployment news, despite a lot of hard medical news coming out, the stock market just kind of continued to rise. And it was freaking people out, like why is the stock market not reflecting what's happening right now? So I thought that was kind of important to cover, and I got just

a couple of thoughts. I think, you know, one thing that we experienced in this downturn, in particular, what we experience just a lot of government intervention in the market that's been taken to like an extreme that we've never seen before. So I think that's one reason that the stock market has actually been performing better than it probably otherwise would have. Injecting that kind of money into this system that supports unemployed Americans, direct payments to almost all Americans,

and grants to sustain small businesses as well. It's the massive actions that the FED took to show up the main street of eonomy. It's created a lot of solvency, and it's also created a lot more optimism than than we would typically see for investors. Just to know that the government is there and has the backup of the economy. And granted, a lot of those programs haven't gone quite quite according to plan, some of them have been really

poorly implemented. But I feel like we have seen companies that otherwise might have gone bust, might have had a really really hard time climbing out of the COVID trough that they've been put in. I think it's no wonder that we're seeing actually a more positive sentiment from investors then would normally be the case in a typical recession

of years past. Yeah, and you know, to specifically address to just the the difference between what we're seeing in the stock market and what we're seeing in our day to day lives. Right, the difference between Wall Street and the difference between Main Street is that investors are optimistic because of all this money that has been injected into the economy, and you can see that optimism daily and by the minute based on stock tickers. Right. I think

investors do have reason to be optimistic. But then the question is why do we see what whate is like our lives trailing that optimism in the stock market. And I think that comes down to the nature of what we've experienced, right, I mean, there's been government mandates that we need to stay home. Businesses have been forced to shut down for you know, over a month, you know, some close to two months, and it takes a long

time to start that machine back up, right. It's like this massive freight train that, uh, it's pretty hard to stop on a dime. But we pretty much did that, which is crazy, But it takes even longer to get that train rolling again. It takes a lot of energy and a lot of time. And so I think that's kind of the difference between what we're seeing on Wall

Street and what we're seeing on Main Street. Then overall, you know, I think a lot of folks might be asking the question, should the government have intervened that much? Should the FED head stepped in like they did? And you know, I think you and I would say that it was largely necessary in order to prevent our economy and businesses and just the markets from taking even more.

You know, we we've yet to see the long term effects of that involvement, But this is an explanation as to why we are seeing the stock market recover, but at the same time we're seeing our local businesses and and even national companies lag behind when it comes to their ability to conduct business, but then obviously when it comes to their earnings as well. Yeah, we don't really

get a whole lot into macroeconomics map. This is kind of a big situation where macro economics has impacted us in a microway with stimulus checks, with the need to take on these government loans if you can get one through the PPP program, through the s b A, and also too, we saw some of these big companies, the big airlines, Carnival cruise lines get money from the government. Was that the right move? I mean, it's really hard to say, and a lot of smart people come down

on different sides of that issue. So it's not something that we're gonna cover too much here. But that was an interesting question because I think a lot of people are seeing the stock market doing really well in a time where they're not doing really well, and it's hard to see. But that's also kind of the way it happens sometimes. That's kind of what happened after the Great Recession.

The stock market almost led the recovery. There were a lot of people predicting the stock market was going to go lower and lower, it was going to continue to sink in a time when it started to rebound. That was hard for people to fathom in the after at the banking scandals in the foreclosure crisis, but it happened. So yeah, I'm glad we touched on that a little bit. But okay, well, we're gonna get to some personal considerations and how people need to think about investing right now,

in particular in a volatile market. We're gonna get to our thoughts on that right after the break, all right, so we are back from the break. We're talking about investing in a volatile market. And when we say investing in a volatile market, we actually mean putting your money into a volatile market. Uh, and we also mean it from the standpoint of how to do it right now. Right, So that's what we're gonna talk about right now. We're gonna talk about how to actually go about doing that.

But first we want to point out that your own personal finances that is going to dictate whether or not you should be investing right now. Your your personal finances, like that's gonna actually take priority over investing right now, because investing in a bear market is a great thing, right if you are not trying to time the market. And if you're investing for the long haul, and if you have steady income but you don't once to prioritize investing if your paycheck isn't secure and you don't also

have a solid savings back up. Also, if you are close or if you are in retirement, you know, there are other impacts you need to consider as well. If if its downswing has you freaking out a little bit because of the portfolio erosion that you've suffered, you may not be properly allocated, and that's something that you can

change as well. And also you might need to maybe rethink some certain financial levels that you have, perhaps you know, pairing backs and you're spending or even working a little bit longer. There is more to our personal finances and our money than just investing, and so make sure that you have those kind of basics squared away first before you kind of continue with our conversation today. Yeah, and everybody right now, I think has to have a written

investing plan. That's such a crucial part of being able to actually continue to invest when the market's down, when it's volatile, when it's up and down, right, and it's I think randomly buy and selling can can lead to financial loss for people, but it can also lead to higher levels of stress. The results can be catastrophic for people in their retirement accounts, and it can also just

raise their blood pressure at the same time. So it's important for people to make decisions before of all the market occurs, to kind of have that written investing plan in place, So start to make some of those decisions. Now, see how you've reacted to the current market volatility, and I think that can help you write your investing plan based on your own personal tendencies, right, And a couple of questions that you need to ask yourself are do I ever invest in individual stocks? And if so, how

much and then when? And what are the metrics that you need to see in order to make buying that stock or or that e t F a smart move? Do you start to pour extra money into your four O one K and roth ira when the stock market

dips to a certain point. You make sure that you have these things in writing so you can know exactly how you're planning to invest when the market does have a dip in particular, and that so much of this comes down to, like a rules based approach to investing, having a checklist or clearly defined process of how and when we buy and sell investments. That can help us to avoid irrational and exuberant decisions and can provide some

consistency to our approach that can really be difficult to muster. Otherwise, it's really hard to stay consistent, especially in the face of uncertainty and difficulty, And so I think those those rules that you always follow and then sets of questions that you have to ask yourself before you decide to invest more are super helpful as we seek to become good long term investors that don't fret too much about

the ups and downs of the market. That rules based approach can provide a good deal of clarity, and it can make it easier to follow through to continue investing even in a time where you are feeling uncertain about where the market is and where it's going. And at the same time, those rules can make it a whole lot easier on your brain to prevent you from thinking about all the possible what if scenarios, because there are

so many of those. If you have your rules and your approach and you stick to it, it's it's just so much easier to continue going at that specific pace. Yeah. Man, Essentially, what we're talking about here is creating some routine in our lives, specifically in our financial lives. In our day to day you know, regular lives, we have routines. Uh, A lot of us wake up at the same time every single morning. We don't, you know, the night before. We're not looking at the clock thinking, okay, what time

should I wake up in the morning. It's just it's kind of on autopilot. And so that's what we're talking about doing here with our finances as well. So for instance, like dollar cost averaging, this could be a great approach, a great rule for you. If you can dollar cost average into your FRO one k every single paycheck and also into your I RA every month, then you're going

to be off to a great start. And then in addition to that, with excess cash that you then once invest you can ask yourself maybe a series of questions like well I need this money in the next few years,

like do I know what I am investing in? Generally speaking, the simplier strategy is that's going to make this process far easier and so one of the easiest ways to simplify your strategy in your approach is to look at target date retirement funds, or just as easily you can look at total stock market funds or SMP five hundred funds.

And we know that this approach has proven and it's effect and this is a way for for you to stick with something versus kind of constantly having to grapple with it mentally, right and so like on the other end of the spectrum, you might be asking yourself, you know, should I be investing in a sector that I maybe know nothing about. Recently, man, there's a story about a lot of folks deciding to start trading this cheap oil e t F on Robin Hood. But the fund actually

it wasn't what they thought it was. They thought that they were buying actual barrels of oil essentially, but in fact, in reality, they're actually looking at futures contracts and it's much more sophisticated financial products, and it's it's not going to reflect the cost of oil, you know, Like folks thought that, oh, it's it's cratering right now, now now is the time to buy. I want to buy it low. But unfortunately they didn't do the due diligence to know

that this wasn't actually the cost of oil. Uh yeah, it was on the contracts instead, yea. And then the e t F had to make fundamental changes to kind of how it did business, how it structured itself, and some of these individual investors, depending on how much money they put in, that that money could be wiped out. And and that's something that probably wasn't on a lot

of their radar. Oh yeah, knowing your strategy, keeping it simple, not investing in a certain E t F or sector because you saw one hot tip or a story touting how great it was gonna be. That can a make it so much easier to continue to invest if you're going about it in a way that's just incredibly simple and easy to understand, and at the same time, it prevents you from investing in things that you don't really know anything about. So, Matt, one of my favorite financial writers,

his name is Ben Carlson. He writes at a site called a Wealth of common Sense dot com. He wrote about how he's handling additional funds as the market goes through some volatile times, and he's got some stage advice. Man, It's important to note that not everyone is in his position, right, he's saved up enough money to tackle it in this manner. But we'll post a link to his plan in the show notes. It's pretty similar to kind of what I like to use as well. First, he's dollar cost averaging,

and that's something that you just talked about, Matt. He's putting money in every single pay period or every single month. Basically he's taking time in the market off the table, and he's just doing it consistently, which is an excellent way to be an investor. And he said that his in frequent income goes directly into investments. So let's say he gets some birthday money or Christmas money out or whatever, he is going to put that money in the market,

money that he didn't see coming. Uh, that infrequent infusion of cash, that's where he's gonna put it. That's what he prioritizes. And then he said he's ready to quote unquote back up the truck when the market hit certain benchmarks. And so he's got a certain amount of cash on hand that when the market does go down a certain amount, he's ready to to put that cash to use in

his portfolio. And so, yeah, his rules based approach his clear definition of his rules is is so helpful in keeping the course and continuing to invest no matter what

the market looks like. Yeah. Man, you know what's important here, though, is to define what your rules are, and so depending on your income and your savings rate, like backing up the truck, that could mean contributing maybe just a little bit more to your following k at work, it could mean maybe completely maxing out your wrath I ra A, or that might be investing even more in a taxable brokerage account. We still want to make sure that we're

keeping enough cash on hand in an emergency fund. But then having rules, you know, in addition to that to guide you during uncertain times, it's gonna be really valuable. We talked about your plan a little bit. We talked about Ben's plan. Let's talk about my plancin. Oh you know me so well. Bitcoin and gold look at you all the way, but only physical goal that goes underneath your mattress, I like the actual bullion that you hold. Man. For me, I found it was really important to to

actually write out a plan. So for Kate and I, we have a variable income, so we found that it was important for us to be super nerdy here and lay out some of these rules, like we're just like we're discussing and we did this years ago. So what that means for us is that at the beginning of the year, we try to fully fund and max out

our roth iras as soon as possible. That doesn't necessarily mean that we purchase funds yet, but we make sure we go ahead and transfer that money from our day to day checking and savings account over to our brokerage company, specifically Vanguard. And right now, the roth Ira contribution limits are six thousand dollars, so it's really easy to chop that up into twelve months. You've got these little bite

size piece is of five bucks. I love that. By the way, once they up the maximum to the six k, made it a whole lot easier for me to wrap my brain around that, right. Yeah, a year cap was so hard because you couldn't come up with an even amount that you would you put in every month. Yeah, man, I can't do that kind of math in my head. Exactly me neither. I like, I like the five dollars.

So basically we know that every single month we have we have five hundred bucks to purchase some of our favorite retirement funds, specifically VOO like v o Oh, that's my favorite, and so like you, like Ben, every single

month word dollar cost averaging. However, one thing I like to keep an eye out for, though, like Ben mentioned those benchmarks specifically, what I like to keep an out for is that if the market ever drops, you know, close to ten percent within a thirty day period, that means I'm not just gonna buy a single month's worth of vo I'm buying three months worth, So that means we're going in. So that doesn't happen often, but you know,

maybe like once or twice a year or something like that. Um. But then beyond that, another benchmark is if I ever see the market get close to you on sale, that means we're putting a lot more and like closer to six months. And I can only really remember this happening like once or twice in the past ten years, where we were looking at buying six months worth of VOO right three thousand dollars. However, Man one other benchmark that we had never really set because this had never happened before.

But recently, back in March, you know, the markets dip close to thirty percent and although we didn't have this written out to worry. Okay, any time in the market will drop by we will buy, you know, we will completely buy everything. We we saw this as a great opportunity because for us, in our adults lifetime basically of investing in the market, we've never seen a discount this dramatic.

And we completely depleted the rest of the money that we had sitting there waiting to dollar cost average for the rest of the year because it was on sale so drastically. I will say, we were a little bit nervous and we still are because we don't know where the bottom is. We you know, it might continue to drop some more. But given the rules that we had laid out with ten, we just saw this as an extension of our rules. So because of that, we went ahead,

and Man, we went all in. We wanted to make sure that we're taking advantage of the market being on sale, and we made the rest of our purchases for the remainder of the year, for the remainder of you know, it's good to have these rules set in place dollar cost averaging, but over the years, Man, I've also seen the advantage of there being some flexibility when it does come to making sure that you are able to purchase some of these funds while they're on sale. Well, it's

interesting to hear you plan, Matt. Yeah, it sounds like it's similar to bend, but it's got a couple of caveats, so you know, yeah, again, I like to overcomplicate stuff over things stuff as well. Yeah, Well, we've got some other tips we want to share for people that want to take advantage of a volatile market, and in many ways it's gonna involve raining in your emotions. So we'll get to some of those thoughts right after the break,

aren't Att. We're back from the break, and we're gonna talk about, yeah, the emotional aspect of investing in a volatile market. But the one of the main things that we need to talk about before that is the idea of rebalancing your portfolio, and that in particular can be a powerful thing to do in a down market. So let's say you don't have all of your long term investments in a total stock market index fund like Matt and I tend to do, or target retirement fund, which

we also think is a great option. But you've got a mix of different funds, including stocks, bonds, maybe even reads real estate investment trust, which we've talked about on

the show before. Well, based on the movement that we've seen, now is probably a really good time to rebalance your portfolio because your allocation has changed in a big way because of the volatility that the stock market has experienced, right, and so moving money from for example, bonds two stocks right now, it helps you get back to your former level of portfolio balance, like kind of how you had things,

you know, maybe three or four months ago. Well, at the same time, it allows you to take more advantage of the recovery that's inevitably going to happen. So, yeah, volatile market times are a perfect time to think about rebalancing your portfolio and bringing that portfolio back into kind of that ideal alignment that you have, whether it's sixty forty stocks and bonds seventy thirty, like, however you think about it, make sure that you are thinking about rebalancing

when the market is going through some tough times. Another perspective for us to keep in mind, to help us to keep from freaking outs when the market is supervolatile, is to make sure that we're keeping our retirement account in perspective right Like, so right now, we're just looking at the trees, like we are seeing the ups and downs of the market. We're seeing it tank not too long ago. But what we need to do, though, is

to step back and see the entire forest. It is shocking to lose such a large portion of your retirement in such a short period of time. But Joe, it's also important for us to remind ourselves though, that the greater the risk, the greater the reward. And that is really important for us to keep in mind when we're in the growth phase of investing, right like, we don't need to be looking at our balances right now. Like I literally don't even know what my balances are right now,

because it's not important. All I know is that I'm going to invest every single month. So Emily just got her four O one K balanced from a previous employer in the mail, and I opened it four and and kind of told her what had happened. And I told her that that her balance had dropped three thousand dollars because it's a pretty small for one K, there's not a whole lot in there. And she was like, what, Oh my gosh, it's terrible. And I was like, no,

that's not bad at all. I told her how much I assumed mine had dropped because I haven't logged in lately, and she was like, oh, that's a lot too, and so she just starts freaking out. But really, when it comes down to it, I'm not freaking out in the slightest because I have a perspective of kind of the overall forest of what the stock market does throughout the years, throughout its lifetime, what the American economy tends to do, and so yeah, thirty percent drop in one month just

doesn't really freak me out, honestly. But yeah, it was interesting to kind of get her take and hear what she thought about that three thousand dollar drop. That can be disheartening to see, I think when you open a statement, and for her it was, But that's the kind of thing having that sort of other perspective can make opening that statement a whole lot less dramatic and hard. Yeah, it's so important for us to zoom out and to

pull back a little bit. Right. So, for example, stock portfolio was down roughly from the peak, like we you know, we're talking about earlier, not that long ago. But then stocks shot back up, right, but over the past ten years still take I'm going to account the most recent crash equity portfolio, so all stocks still have performs any other diversification strategy, and you're gonna be up a hundred

and forty two percent over that same time period. Yeah, Matt, Like you said, the greater the risk, the greater reward. But it does come with volatility, even more volatility if you're less balanced and and more heavily invested in stocks. And I think one of the reasons that people are so hesitant though, to to continue to invest in times of volatility is because of loss aversion, and that can be a really powerful behavioral mechanism that prevents us from

becoming good investors. Right, none of us want to lose money, and the surest way to not lose money is to not put any at risk. But that's not a great solution either. Right. We've talked about this on the show before. But because taking calculator risks is the only way to ensure that we reap inevitable future rewards. Well, when we let our aversion to loss cause us to sit on the investing sidelines, were actually locking in the greatest risk

to our money, which is inflation. So yeah, people freak out about the potential for lost in this stock market, but you don't actually lose anything unless you sell your shares, unless you sell positions. And so if you're able to to stay invested and you look at that forest of what the stock market does over the years, well you're not gonna actually incur any sort of losses. You're gonna

incur create gains. But it's that loss of version, that mental loss of version that prevents us from actually staying the course. Usually, Yeah, avoiding this perceived risk altogether, like that is the risk is move that we can make, right. We talked about this back in episode sixty nine. Investing in the stock market does have an element of risk involved, but it's just completely different than the kind of risk

that you would incur gambling in Vegas. Like our friend five Am Joel likes to do once a year, was to go to Vegas. That's just what he does. I understand that. But keeping your money under your mattress like that is a sure fire away to make sure that you don't lose any of it. But inflation is going to steadily march on, ensuring that the money you stood away will lose purchasing power with each growing year. That's why investing, whether in a volatile market or not, is

so important. So this kind of makes me think of Seth Goden as well. He talks about the lizard brain and how like we kind of have this prehistoric, you know, lobe in our brain that all it wants us to do is to be safe, to not take risks and just survive essentially, So like in prehistoric times that meant like making sure that we get enough food to eat and to make sure that we're not eaten by something else.

But what that means for us today is that we just sit on our money, right, and we don't put it at risk, which is the exact opposite of what we need to do. So, like he talks about that in the context of like launching businesses and delivering products, taking risks, things like that, but it completely applies to investing as well, Like it essentially takes this sort of act of defiance to you know, actually invest, right, we have to quiet that lizard brain, and it takes action

actually investing your money. Yeah, and and these are risks I would say that we're taking with our money that are based on a factual reality and historical reality of what the free market does, of what innovative businesses tend to do. And so, yeah, this is not just aimless risk, right, These are These are calculated risks, and so that's I think an important distinction to this doesn't have, like you said, any correlation to putting your money on the crafts table

or at the roulette wheel. It's altogether different from that. And Matt, I think ultimately market volatility is the source of enhanced future returns for us. The overall American stock market has returned roughly nine percent over the past ninety years. In those ninety years have had their share of difficult events, Matt. If you go back and look at American history, there's a lot of tough stuff that happened over those years, right, wars, depressions, inflation, deflation,

politicians of all sorts, of different stripes. And so while it feels a lot better to be buying as the market is rising, at least on our inn tives, right, it's like, oh cool, I keep seeing it go up. We'll know that American capitalism has continued to produce results for decades on end, despite real challenges in our face

foreign enemies, uh wars on foreign soil. I mean, these sorts of things have affected returns, they've affected the stock market, but they've also created opportunities for people at the same time. So investing in an economic tailspan, although it feels a bit counterintuitive, I think it's the best thing that people

could be doing over the long term. So at a minimum dollar cost averaging, right, that's the first rule I think that most of our listeners should be implementing if they want to be good investors through thick and through thin.

And then you know, they can add rules onto their investing plan that go on top of that that help create, uh an even more efficient system for them to become an investor that invests in a volatile market and that is building well through thick through thin for the long term. And so I don't want to like discount all that we just said, but maybe the too long didn't read it is just keep investing like that. That's all you really need to do. Just make sure that you continue

to put money into the market. Yeah, boil a thirty five minute podcast episode down into into like, you know, one sentence. I like it. It's probably should have done. We'll keep investing. Yeah, no matter what, whether things are volatile, things are down, it shouldn't be a warning flag to not invest. It should actually make you more excited to continue to do so. I agree, all man, let's go

ahead and quickly take it back to the beer. This episode, we enjoyed a beer from Creature Comforts out of Athens, Georgia, and it's called Athena Paradiso. What were your thoughts on this one, buddy. As I said at the beginning of the episode, I love this beer. Lots of fruit, super fruit heavy out of those red tart fruits going on and and so yeah. I love kind of the way those fruits play together and kind of create a nice little medley. I'm gonna say it pours a nice pinkish

red color. It's tart, it's fruity, it's just thirst quenching. It's a perfect beer, especially for summer, as we get closer and closer to the really warm months. I love a beer like this. I mean, I wonder if they choose the color on the can, uh, if they sample it from the actual beer color, because it is so spot on and like the colors of beer, it varies from you to year. But I feel like it's the exact same color this year. But yeah, so this is a German style wheat and so it's it's a wheat beer,

but it's a super sour tart wheat ale. But then on top of that you add the tart, cherry, raspberry and cranberry to it makes it a lot more interesting. In particular, I like this year it had a lot more of that chair we're going on, which is really delicious. And yes, so we're finishing up my stock for this year, but but it's really good. Close it. Yeah, we'll glad, glad we get to share it on the on the show today, the last two until next year exactly. All right, man,

that's gonna do it for this episode. For folks at once, show notes, well, they can get to our website how to money dot com get more info there. If you're listening to this episode and you have not yet subscribed to our show, we would ask you to go ahead and mash that subscribe button wherever it is that you

listen to your podcasts. And then also if you've been a long time listener but haven't yet left us a review, we would love for you to head over to Apple Podcasts leave us a solid five star review over there, as that helps us to get the word out, help others to find our show who need to be doing smarter things with their money as well. Yeah, some people need some more encouragement, need some more help, and that's what we're here for. Yeah, buddy, all right, Well that's

gonna be a dude. Until next time. Best Friends Out, Best Friends Out.