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One of the criticisms often leveled at the US markets is that they're just they're topping out, They're just keeping on going, and all of a sudden there's going to be a crash and people are going to burn as a result. I mean, what do you sort of say to investors in terms of keeping that longer term view, knowing that markets, as you said before, go up and go down.
Yeah, it's important to just think of that long term time horizon. If we look at twenty twenty two, the sixty forty portfolio we mentioned earlier had one of its worst years and since nineteen thirties because both stocks and bonds were down together, which is rare. So you know, that was a clear example of a time where people were feeling a little bit of the pain of the
market and having that drawl down. But those that stayed in it, that return we've seen since twenty twenty two is almost forty five percent in the S and P five hundred and it is sixty to forty portfolio would be muted a bit to that, but it's still you know, that growth that you've had in that time period by just staying the course and staying focused on your long term plan and not reacting to short term market events
even if they aren't. You know, it's not easy to see on your portfolio when the number goes down, but it's really important, and we've showcased over time this. You know what happens when you get out of the market when the time is in stress and you miss that, you know, return to positive returns. What that does with the long term investment because of the impact of compounding
is quite great. So we really try to reinforce to tune out the noise that's in the market and really just be focused on if your plan is twenty years from now, your portfolio doesn't need a lot of change right now to be able to achieve the goals that you have for your long term investment returns.
What would you say to New Zealand investors who are thinking for the first time to invest in the US markets that might have played around a little bit with individual stocks, but perhaps now they're thinking exchange traded funds is probably an easier, cheaper, maybe safer way to go.
Yeah, I mean I think that it's we do, you know, stress, the importance of diversification, and that is something that ETF gives you. You can trade it like a stock within the market, but it still gives you the broad exposure of what the underlying portfolio is made up of, and in this case, it's the five hundred largest companies in the US. So that diversification that you get over choosing one single stock really is an important risk mitigation tool.
When we look at securities over time, the number one security and the S and P five hundred at you know, in two thousand and five, in nineteen ninety five and nineteen eighty five, it's different every time you look, because you know markets are going to you know, there's just different situations for different securities that are going to increase
their value or decrease. So having that broad exposure instead of maybe even looking at you know, everybody looks at We just take Nabidia as an example, because of the great ride that it's had. Everybody wants to have the number one stock in the market, but the video won't always be the number one stock in the market. And how are you diversified when there is a drawl down there if the valuation might get too high. The rest of the portfolio helps to kind of pick that up.
So we really just stress that diversification. We think this gives a great opportunity to get that and a wrapper that again is really low cost and easy to access.
Diabet There's a phrase online where people say voo and chill. Just wondering what your take on that is.
Yeah, it's it's a funny phrase that you know, I think we are starting to see follow in the lexicon a little bit more, and it's really to me, it resonates a lot of what I just mentioned. It's you know, you don't have to get complicated in the market. You don't have to be chasing returns or looking for opportunities to maybe find the next hot product. Just buy voo, buy vu and and chill. Just you know, kind of sit on that, continue to invest it as you have
new moneies go into it. And because what we see is over the course you know, long dated period, say fifty years as the longest, only about two percent of
active managers can beat the index. So instead of chasing some of those returns from that active management or some of those strategies, buying the index, that whole index and just you know, sitting it out and just waiting for the long term or voo and chills, as can be said, is really a you know, we think a really great strategy to just get those long term investment returns that we talked about. Investing involves the risk you might lose
the money you start with. We recommend talking to a licensed financial advisor.
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