Investing in Uncertain Times

By Dean Barber

November 5, 2020

Investing in Uncertain Times

If there is one thing that’s certain in our economy and country, it’s that there is always uncertainty. Join Dean Barber and Bud Kasper as they talk about investing in uncertain times. There are really no times that are certain, but right now there is more uncertainty than ever before especially around COVID-19.

Podcast 17: Economic Cycles and Avoiding Emotion Investing  Complimentary Consultation

Investing in Uncertain Times

Dean Barber: Thanks so much for joining us here on America’s wealth management show. I’m your host Dean Barber, along with Bud Kasper. All right, Bud.

Bud Kasper: Been an exciting week.

Dean Barber: It’s been an exciting year. Are you kidding me?

Bud Kasper: And of course, the question is, “Now what?” 

Dean Barber: No. Well, all right, so we’re going to talk about investing today. We’re going to talk about investing in uncertain times, and the thing with investing is hindsight is always 20/20, right? No pun intended there, but I mean, seriously, you can look back and say, “Man, I wish I would have done that differently. I wish I would have done this another way.” 

I don’t know how many people you had, Bud, calling you or asking you in your process of reviewing, “What’s going to happen in this election? What if Biden gets elected? What if Trump gets reelected? What if there is a Democratic sweep of the House and Senate and Biden gets-” I mean, all these different scenarios, right? I’ve been pretty consistent with my message.

Bud Kasper: Yeah, I have too. 

The Market Doesn’t Care

Dean Barber: The thing is we have to remember that, by and large, the market doesn’t care. Okay? The market does not care. All right. Let’s look at the two to three days leading up to the election, specifically the trading days of Monday and Tuesday last week. Right? So, the markets were up sharply on both of those days, and what was the news? Markets are trading higher ahead of the election. Right? So, it was all about the election.

Bud Kasper: It’s got to be rosy.

Dean Barber: Never mind the fact that the ISM manufacturing index hit a two-year high. That’s a pre-COVID high. Okay. That’s a big deal.

Bud Kasper: It is a big deal.

Dean Barber: You think that had something to do with what was driving the market instead of the election? 

Bud Kasper: Yeah. Well, the smart money most certainly is paying attention.

Dean Barber: All right. Then what about this? We have an unemployment rate that is at a post-COVID low of seven and a half percent. We had retail sales exceeding expectations considerably. Do you think that had anything to do with what the markets were doing?

Bud Kasper: Wow. 

What’s Driving the Market?

Dean Barber: And then we had, let’s see. Four things were driving the market. I’ll think of the other one here in just a few minutes, but the point is this. The point is that there were economic drivers behind what the market was doing Monday and Tuesday. These were not emotional trades based on the production of a prediction of a victory for either party. 

You and I can go back, and we’ve done this, and look at all the different possible scenarios. Democrat house in Senate, Democrat in the White House. Republican House in Senate, Republican in the White House. Republican White House, a split house in Senate or Democrat-controlled House in Senate. There are six scenarios that you can have. If you look from a historical perspective through all of those different scenarios, the difference in performance over time with all those different scenarios is insignificant.

How Influential is Politics?

Bud Kasper: Yeah. So, what’s the lesson out of that? It says that politics doesn’t have a great deal to do with how the market is run. However, it can have some influence. Those influences should come from the type of expectations people have for infrastructure, where jobs can be created, and things like that. We all know that. That’s all positive information, but you’re right. When it comes down to the market, and you go back in any periods, even those periods when things are low, there wasn’t necessarily a horrible catalyst that caused it.

Dean Barber: Right. Well, I remember the fourth thing. It was the third quarter GDP jumping by 33.1%. 

Bud Kasper: Okay.

Dean Barber: Okay? So now obviously, that’s coming off the second quarter, which was laden with COVID, but still, that’s huge. Right? So those things (driving factors) are all looking out there saying, “Well, things look pretty darn good in the manufacturing sector. Unemployment’s looking a lot better, and we’ve got GDP picking way back up.” So, there were a lot of positive aspects.  

Smart Money Loves Emotion

Those returns on Monday and Tuesday had nothing to do with the election, yet that was the headline. And I’m going to say this, the smart money on Wall Street loves the emotion. They love getting you, as the individual investor, to follow them like a herd of cattle. Okay? Keep this in mind. For everybody who wants to sell a stock share, wants to sell an ETF, there has to be a willing buyer on the other side. If you want to sell your house, you must have somebody willing to buy the house.

Bud Kasper: Right.

The Dot Com Bubble

Dean Barber: Okay. So, when markets are elevated, typically, the smart money’s been in there for a long time. I want to go back 20 years. Let’s go back 21 years. Twenty-one years from right now, November of 1999. What was going on, Bud? November of 1999, we were in the throes of the strongest bull market you and I have ever seen.

Bud Kasper: Five years of double-digit returns.

Dean Barber: Yep, and it was coming in technology. It didn’t exist, but it was anything that you put dot com behind.

Bud Kasper: You took that from me 

Dean Barber: Anything that you put dot com behind was just on fire, right? The smart money knew that the jig was up. This isn’t going to last forever. So, what did they do? Man, you guys are missing out. They opened these day trading things. You can sit down and smoke a cigar and trade on the market and all these things.

Bud Kasper: I don’t need Social Security. I’m making too much money in the market.

Dean Barber: Why did they do it? Because for every wannabe seller, there must be a willing buyer. They had to get you to be willing to buy when they wanted out. Don’t forget about that. There are two types of money on Wall Street. Smart money, dumb money. Where do you sit? 

Construct Your Portfolio Based on Your Goals

Look, this is all well and good. The bottom line is, you should be constructing your portfolio based on what’s truly important to you and what your money needs to do. Don’t get caught up in headlines. Don’t get caught up in the mania that is the media. Let us sit down with you. Let us explain to you how to invest intelligently and get the emotion out of the way.

Dean Barber: We want to offer you a complimentary consultation. Sit down either via Zoom meeting, a telephone call, or we can even do in-office meetings. Let’s sit down, talk about how we can help you make smarter choices. Click here to request your complimentary consultation. 

Bud Kasper: There will be challenges ahead, but if you keep your head straight, you can win.

Dean Barber: Look, we’ve got uncertainty. You can go year by year by year by year by year. There’s uncertainty every single year. You forget about it, but you need to know how to invest in times of uncertainty.

Bud’s Biggest Investing Mistake of the Last Year

I want to talk about Bud Kasper’s biggest investing mistake of the last year. Bud, are you going to admit to this mistake?

Bud Kasper: Depends on what you think it is because I told my wife I didn’t make mistakes.

Dean Barber: And she believes you?

Bud Kasper: No. But I had to say it for my purposes.

Dean Barber: All right. So, Bud Kasper’s biggest investing mistake of 2020 was not putting 100% of your clients’ money in Tesla.

Bud Kasper: You’re right. I missed a huge opportunity there. And so did my clients. Forgive me.

Dean Barber: I mean, imagine this. Imagine this, Bud. Had you put 100% of your clients’ money in Tesla just 12 months ago, they would have gained 576%. How could you miss that? 

Bud Kasper: What should I say? I was distracted. I was distracted by representing all my people.

Dean Barber: How could you miss that?

Bud Kasper: Yeah.

Just Kidding Bud

Dean Barber: Okay. I’m being facetious, of course. But my point is this, okay? We have a tendency, as a human, to question what we missed. Now, in this example, it would be ludicrous for anybody to say, “I’m going to take 100% of my money and put it in any one stock.” Okay? Nobody can predict what a single stock will do over six-weeks, a 12-weeks, a year. It doesn’t matter. You can’t predict it.

Bud Kasper: Right. But for that reason, what do we do? We diversify. So, I’m going to challenge you back on my mistake. I did get a piece of Tesla because I had clients invested in a technology index where Tesla represented around 5% of the entire portfolio.

Dean Barber: Right. So I had some of that too.

Bud Kasper: So I want an asterisk. 

5 Stocks Make Up Most of the S&P 500 Return

Dean Barber: Most of my clients had that, which contributed to a good portion of the terms. We did this here a few weeks ago, where we talked about the five largest stocks in the S&P 500 that are making up most of the return. If you strip those five stocks out and go with the 495 remaining, you have a negative return in the S&P 500 this year.

Bud Kasper: Yeah. Here’s another statistic on that. If you take the top three sectors, information technology, healthcare, and communication services, all three represent 50% of the S&P 500’s return. 

Dean Barber: Yep. And what does this remind you of? Why do you think I brought up 1999? 

Bud Kasper: Because you’re saying that it could happen again. 

Finding Returns in Narrow Parts of the Market

Dean Barber: Well, I’m saying when we see returns coming in such narrow pieces of the market, it’s not healthy. It’s not normal. Yes, it’s times of uncertainty, but sometimes in times of uncertainty, people get kind of goofy. They forget about diversification. They’re like, “Well, why don’t you just put everything into technology?”

Bud Kasper: Well, it’s greed and fear. 

Dean Barber: It is. But if you owned Tesla. Let’s just say that you put a hundred percent of your client’s money in Tesla a year ago, and they’re up 576%. Do you think that maybe you might want to sell some of that?

Bud Kasper: No, it can do it again. 

Dean Barber: So if you want to sell some of it, what do you have to do? You convince someone there’s still room left to run. 

Bud Kasper: And in Tesla’s case, many do.

Wild Returns in the NASDAQ in 1999

Dean Barber: Many do. Okay, so when we look at the NASDAQ in 1999 and the wild returns that were happening, if you had the technology funds and stocks, you were up almost a hundred percent in 1999. They exploded in those five years from 1995 to the end of 1999. But the interesting fact is that 90% of the money that came into the NASDAQ stocks during that five-year bull run came in in the fourth quarter of 1999.

The smart money said, “You know what? We’ve made a lot of money here. It’s time for us to sell, but we got to convince everybody else it’s still okay. We got to convince them that they got to buy it.” And what happened? You had 70 to 80% drops in the NASDAQ composite in two years. It was awful. 

Bud Kasper: Yes, it was terrible. But five years of double-digit returns, that seems incredible. And it was. Every mother’s son was buying stocks at that time. And what were people not doing? They didn’t want anything to do with bonds. 

The Monkey Picks

Dean Barber: But remember what happened? They hung the stock section up at the Wall Street Journal. Now, they give the stock quotes? 

Bud Kasper: Right.

Dean Barber: Okay. We don’t even do that anymore because we can pull up any stock we want to look at online at any instant on our smartphone or tablet or whatever. We don’t even do that. But they had taken the pages out of the Wall Street Journal, hung them up on the wall, blindfolded a monkey, handed him some darts, and let the monkey throw darts.

And the monkey, whatever stocks the monkey hit, pitted those pics against the pros, and the monkey won. So, the insanity around what was happening in the markets at that time, Alan Greenspan said it perfectly. “Irrational exuberance.” Right? Well, today, we have the same thing with technology. Just throw your money in the technology sector, and you’re going to make some money. For a while, maybe. So let’s get back- 

Bud Kasper: And maybe for more extended periods as well. When you look at this, I’m an old fundamentalist. I’ve got to have earnings underneath the stocks to be able to support it. Well, we didn’t have that in 1995, six, seven, eight, and nine. And that’s why it got so speculative. And of course, when they didn’t achieve those earnings, then people said, “Oh my God, we’ve overpaid for this thing.” And then, the collapse came with three consecutive years of losses in the S&P 500.

Dean Barber: Well, speaking of earnings, the price to earnings ratio on Tesla is 847.

Bud Kasper: Sell. Sell.

Insane Price to Earnings Ratio on Tesla

Dean Barber: Okay, let’s put that in perspective, Bud. If we look at the price to earnings ratio, is the stock price versus next year’s forward-looking earnings. Right? And fair value for the broad market is considered to be somewhere around 15 to 17. 15 to 17 times next year’s earnings about where stocks should trade. Right? Is Tesla trading at 846 times next year’s earnings?

Bud Kasper: Yeah. 

Dean Barber: Okay. That’s insanity. 

Bud Kasper: You can’t even wrap your mind around it.

Dean Barber: No. It’s insanity. So, let’s step back. Sometimes you can go to Las Vegas and bet on a ball game’s outcome and get lucky. But look, the people on the other side are setting the rules. They’re the professionals. You start playing in that game, who do you think is going to win? The professionals are going to win every single time. My point is this: You need to have a plan. You should understand what your money needs to do to accomplish all of your objectives, what you want to do today, and in the future. That’s developed through a comprehensive financial plan. We call it our Guided Retirement System™. 

Get Clarity in Your Financial Life

This Guided Retirement System™ uncovers every aspect of your financial life. It looks at all of the resources you’re going to have to produce income in the future. It looks at all of your resources and what you have to save. We even look at Social Security. We look at the impact on taxes and how we get money out of those retirement accounts at retirement with the least amount of taxes possible? The list goes on and on.

Once we’ve gone through that, we can identify your PRI, your Personal Return Index. That’s the return your money needs to average for you to accomplish those objectives. Then and only then should we have a conversation about where we invest to get that return.

And we have to be bold enough to say, “That return is unrealistic.”So you either have to change your goals. You either have to push your time horizon out a little bit, or you got to save more money. Or we might tell you, “You know what? Better news. You’ve reached it. You’ve found financial independence. So, if you’re going to work tomorrow, it better be what you want to do because it’s no longer about the money.” 

So many of you out there today are walking around totally blind. You have zero clarity regarding where you are from a financial standpoint and measuring that against what’s important in your life. Our guided retirement system gives you that clarity. Take us up on a complimentary consultation. Let’s talk about how you want your financial life to look, what you want your future to look like, and what you want to do today. We can look at the resources you have, and let’s make sure you’re on track.

You Can’t Retire on Speculation 

Bud Kasper: We both know that you can’t base retirement on just speculation. It doesn’t mean that you shouldn’t have a little bit of it in your portfolio, but as Dean stated, and this is what we get through the guided retirement system, is understanding your PRI. What is the return that I need to have for a successful retirement? And once that is decided, then you need to build the portfolio around that. You don’t need to exceed it. You don’t need to take more risks.

Dean Barber: Right. Because we know this: Risk is ever-present, and mitigating that risk is one of the keys to achieving your objectives with your money.

Don’t Fall in Love with a Particular Stock

Have you ever had someone fall in love with any individual stock? Seriously. How many times have you seen that, Bud? Go back to the divestiture of the telephone industry back at an early age.

Bud Kasper: Boy, do I remember that.

Dean Barber: Go back to Sprint and Lucent Technologies, the darlings of the time. People were saying, “I’m not selling that. Look, it’s in my plan. Enron, no, I love this company.”

Bud Kasper: And most recently, the oil companies, they have just been hammered. I think they’ll come back, but not without the dents being pretty severe.

Dean Barber: That’s true. But the point is people do get an emotional attachment for some weird reason to a stock or a company, especially if you worked for that company.

Bud Kasper: And things change. What is your guess? What’s the longest-running stock to remain in the S&P 500, which is not in the S&P 500 today?

Dean Barber: Kodak.

Bud Kasper: General Electric.

Dean Barber: Ah, GE, okay.

Bud Kasper: But in 2018, even GE fell out of the index at that time, but it had, I can’t remember, 56-year run or something like that. It could be more than that. Nonetheless, things change.

Dean Barber: GE made some big mistakes.

Bud Kasper: They did. I think part of their mistake was they diversified. Part of the diversification worked out pretty well. Remember GE Capital? But then greed came in on that side, and that thing imploded as well. But they have a heck of a CEO right now, and I think that there’s a chance that they’re going to, with time, come back and be a very competitive company.

We’re Always Investing in Uncertain Times

Dean Barber: Hope so. We’re talking about investing in uncertain times, and the reality is this: You can’t invest in certain times. Because if there’s anything certain, it’s that uncertainty is always present.

Bud Kasper: I never know how you’re going to twist a phrase.

Dean Barber: Uncertainty is always present, Bud.

Bud Kasper: You’re right.

Dean Barber: It is. Tell me the certainty behind when we’re going to get a vaccine for COVID-19? When will we have an effective treatment so that people will feel confident getting back out and doing things, and if they do get COVID that they’re not going to die or get too sick? When are we going to have some certainty around that? 

I can put it on a calendar for you of all the uncertainty that rears its head every year, every single year. If you let that drive your investment decisions, one of two things is going to happen. You’re either going stark, raving mad, or will blow it, and you will have horrible results.

Don’t Leave You Motor Unchecked

Bud Kasper: Yeah. I have a client of mine who is the lead epidemiologist at a very well known university, which I’m not going to talk about. But suffice it to say that he has been working with one of the companies trying to develop a vaccine. They didn’t develop a vaccine, but they came up with a treatment for the disease’s symptoms. 

But the point I’m making with this is when you look at all the companies. Whether it’s Oxford in England or what we have here in the United States with Pfizer and all the other ones that are, they are going at it, aren’t they? They’ve got everything on eight cylinders. If you remember, eight cylinders.

Dean Barber: I have that in my Corvette. You have it in your Navigator too. When was the last time you popped the hood on that thing?

Bud Kasper: Listen, I never want to see the motor ever. I want to buy it, I’m going to return it at some point in time, and I hope I never open that hood. I’ll let my wife put it in the washer fluid, and then after that, I’m good.

Dean Barber: Should that be our client’s philosophy when it comes to investing? Look, let’s get the right motor, put it in there, and shut the hood and let this thing run down the road.

Bud Kasper: No, of course not, because there are too many elements associated with an investment plan.

Dean Barber: That’s what Wall Street wants you to do, though.

Bud Kasper: Well, and they’ll go back, and they’ll say, “Yeah, if you’d stayed in the S&P 500, you would’ve had a return today of X.”

Could You Have Handled the Dot Com Bubble?

Dean Barber: You and I have played that game. We’ve played that game. We can do that. We can go back over the last 20 years and said if you were in the S&P 500, your return would have been X. The question is, what did you have to sacrifice to get that? You had to sacrifice two extreme bear markets. What was the peak to trough drop in the Dot Com Bubble, Bud?

Bud Kasper: Dot Com Bubble, I don’t. Oh yeah, I do! It’s 46.5%.

Dean Barber: Okay. I knew you’d have it because you’re a statistician. And what was the peak to trough drop in the Great Recession?

Bud Kasper: 56%

Dean Barber: 56%

Bud Kasper: That’s from October 2007 to March of 2009.

Dean Barber: Correct. To get that long term average of the S&P 500, 20 years, I think it’s around 8% or 9% per year. Something like that.

Bud Kasper: Good point.

Dean Barber: Then what you had to do is suffer through that Dot Com crash and then suffer through eight years later, the 56% drop from peak to trough in the Great Recession. Now the question is: Do you have the fortitude to do that? The answer for almost everybody listening is not only “No” but, “Hell no! I don’t want to see 56% of my money go away.”

Avoid Knee Jerk Investing

What happens is this feeling of dread comes over you. “What are we going to do?” Well, I guess we’re going to put it off. I guess we’re going to have to go back to work. Well, I guess we’re going to give up that vacation. Why? Because you don’t have a strategy. You don’t have a plan. You don’t know exactly what your money needs to do, and you’re not investing to accomplish a specific objective.

Now, yes, you’re going to have many life objectives, and you should have investments set up to accomplish each of those objectives independent from one another. Well, the only way you can do that is by putting together a well thought out, well constructed financial plan. We use a proprietary process we call our guided retirement system. It works like a GPS. 

Let’s plug-in where we want to go and what we want to do, and look at all the resources that we have and know what we’re going to do? We’re going to set a roadmap, and here you go. When you get off track, we need to make a course correction. We can tell when we need to do something different and when something needs to be adjusted. You need to experience this because it gives you clarity, and it gets you out of the weeds.

It gets you out of asking the question, what happens if? What happens if? You need to know, and you need clarity. Don’t invest like the rest of the masses. You need to invest, as smart money does. The only way they do that is by understanding what the money needs to do that they’re investing. Click here to request your complimentary consultation right now. Don’t put this off.

Understand Your Potential to Achieve Your Retirement Goals

Bud Kasper: Dean, who wouldn’t want to know what their probabilities of success will be in retirement? And you might say, “Well, that’s just a flip of the coin. That’s a dart on the wall.” But there are ways to be able to engineer what that probability would look like. And when you get to see all the components associated with a well crafted, totally comprehensive plan with tax overlays in it, then you can grow to appreciate that this is, in fact, a science and not a guessing game.

Dean Barber: Let me give you an example. Back in the day, when my kids were all young, there was no such thing as GPS. We didn’t have smartphones. My wife and I used to hop in an RV with our kids when they got out of school, and take off for a month, travel the country, and see everything. It was a blast. But what I was relying on at that time was my wife’s ability to read a map.

Well, there was one time when I think she had the map upside down. We took a wrong turn, and we’re four hours in the wrong direction. I’m like, “This just doesn’t seem right. It doesn’t seem like.” “Well, look here it is.” I’m like, “Oh my gosh, no, this is not right.” We got lost. No big deal, because we didn’t have any plans. We’re just going up, and it was great.

Contrast that though with this. I recently went on a trip with a friend of mine, and we got to a big detour. Do you know what we did? We plugged it into our GPS. Then if we asked ourselves, “What’s this mean to our arrival time?” And we had it right there on the GPS. 

Let Us Help Guide You

That’s what our Guided Retirement System™ does for you. The technology is here today to allow you to have that clarity of about you’re heading, when you’re going to get there, and what course corrections you may need to make. Click here for that complimentary consultation. Let’s get you on the right path and help you gain clarity in your financial life. 

Don’t Get Impatient and Invest

We’re talking about investing in uncertain times, and there are so many times when people get impatient. Think about the times you’ve had to speed up to arrive at your destination on time; it was likely because you got a late start.

Bud Kasper: Right.

Dean Barber: Right? Which means you didn’t plan right. I’ll call out my brother on that one, right? Because he shows up five minutes late to almost every meeting. Internal meeting. Now he’s always on time for his client meetings. 

I’m like, “Dude, leave 10 minutes earlier!” 

He’s like, “Oh, the people, the traffic.” 

I’m like, “Yeah, well, if you’d left a little earlier, you wouldn’t have had to try to speed. You wouldn’t have had to try to go through that.”

I tell people the same thing when it comes to investing. You wait too long, you didn’t get a headstart, and you didn’t have a plan! Now, all of a sudden, you’re like, “Man, I’m running out of time here. I got to do this.” And then what do people do? 

They go deep. “We need a better return. Come on. Let’s go! I only got four years left! Oh, my gosh! Don’t tell me you can’t make 15% this year for me! I mean, that’s what I need, right?”

Bud Kasper: Unfortunately, and I know you’re making that a little bit humorous as well, but it does exist.

Don’t Invest Emotional Because of Uncertain Times

Dean Barber: It happens every day. Look, those of you listening, you know it. You know when you waited too long. When you didn’t get that plan together, you were just putting some money away. You didn’t have a good solid plan with that. You know when you waited too long to open up the statement on your 401(k) plan and didn’t pay any attention to what was going on with it, “Man, I don’t want to look at that.” 

How many of you at the end of the first quarter just left that statement unopened because you didn’t want to see it? You didn’t want to face what happened. How many of you did that?

How many of you panicked and said, “Oh, my gosh. If this keeps up, I’ll never be able to retire. If this keeps up, I’m going to have to go back to work.”

Bud Kasper: Yeah. Human emotions.

Make a Plan

Dean Barber: We’re talking about investing based on emotion. That’s not what you should do. You need to set out a plan. Look, if you’re getting close to retirement or you’re in retirement, you should have enough money set aside in something very conservative to deal with at least two to three years worth of income. You should do that so that part of your money is designed to try to get that longer-term growth that can have some volatility. 

Bud Kasper: I read to you something earlier that said the S&P 500’s biggest annual percentage gain was 45.02% in 1954. Its worst performance in recent has been 2008 with that 38.49% drop. So what do we have? We have the extremes associated with it. If you take that and you look at the average, and by the way, let me put the politics on top of this as well, and you look at when we have a Democrat in the White House or a Republican in the White House, the spread, the difference over a 10-year timeframe is right around a half a percent.

Economic Growth and Activity Drives the Market

Dean Barber: Right. So that’s why we said at the very beginning, let’s set the politics aside here, because that’s not what drives the market, right?

Bud Kasper: Yes.

Dean Barber: What drives the market is economic growth and economic activity. It’s consumer spending. And the consumer is the 800-pound gorilla in the corner because the consumer makes up 70% of our GDP.

Bud Kasper: Yeah. But how many people out there are saying, “Oh, my gosh, X became president, now this is going to create a huge downfall in the economy and that-“

Dean Barber: Many people will make knee jerk reactions based on one or the other, and at the end of the day, it would likely be a mistake. You may feel good about it in the short term, but the question is, if you’re going to remove yourself from the market, what are your rules for getting back in?

Bud Kasper: Right.

Dean Barber: Right? And if you’re removing yourself from the market, why are you doing it? Maybe because you had too much in there in the first place?

Bud Kasper: That was my point, yeah. If you had regulated that to whatever degree, then you wouldn’t have needed to get out. 

Economic Cycles and Avoiding Emotional Investing

Dean Barber: Right. And for those of you listening right now, I want you to get out to the podcast that I do. It’s called The Guided Retirement Show. You can find it on your favorite podcast app, YouTube, or here. Please listen to episode 17 on economic cycles and avoiding emotional investing with David Mitchell. 

We go into a lot of detail about avoiding emotional investing and the different economic cycles out there, how you treat them, and how you build your portfolio. The economic cycles are typically longer. We have a growth phase of the economic cycle, a maturation phase, and a deceleration where things slow down a bit. Then we hit a trough, and then right back into that acceleration. Those cycles are normal.

Bud Kasper: Yeah. We sometimes call them cyclical or secular, secular meaning long-term, cyclical meaning short-term. But then you have a different definition from various people as to what defines cyclical or secular.

Dean Barber: Well, secular is long-term, cyclical is short term. 

Bud Kasper: You’re one for one!

Dean Barber: Yeah. But we do have cycles, right?

Bud Kasper: Right.

Dean Barber: They exist. We have cycles, and because we have uncertainty every single year, it’s critical that you build a portfolio designed to meet your personal return index. Always keeping in mind that risk is ever-present because risk is always out there. There’s always something on the horizon that we can’t predict, that we don’t know what’s going to happen, and that’s going to present risk. And there’s always times of uncertainty. Okay, so talk about uncertainty. We have uncertainty now.

“Can’t you just time the market?”

Bud Kasper: That brings up a question people ask all the time, “Can’t you just time the market?” And the answer is, “Not effectively over longer periods of time.” That’s my opinion. But I think that’s been born out of what history has shown us in terms of average returns. But again, how you build your portfolio out to adjust for risk when it could be more apparent than other times is a necessary management skill that needs to be exercised.

Dean Barber: You’re right, Bud. But think about this. You’re going to see Jim Cramer on CNBC. He’s got his sleeves rolled up, and his two hairs combed. And he is jumping up and down, screaming, banging on stuff, throwing dolls around, and he’s telling you, “I’m going to COVID proof your portfolio. Buy this. Sell that.”

It’s a show! It’s entertainment. Okay? You remember Joe Granville back in the day?

Bud Kasper: Oh my, yes.

Dean Barber: Okay. What did that guy do? He had a market timing radio show, right? And if you followed his market timing, you’d have gone broke pretty quick.

Bud Kasper: You just brought back a memory.

Avoid the Noise

Dean Barber: But people buy that stuff. Look, don’t do it. Don’t do it. Be sensible. We’re trained as financial planners to help you avoid the noise. You avoid the noise by constructing a well-thought-out plan, understanding what resources you have, being conservative with the assumed rate of returns on any asset class, and making sure you’ve got plenty of cash for your short and intermediate-term needs.

And making sure that you’re investing for the long term properly so that you’re not just meeting your short-term obligations, you’re also meeting your long-term goals and objectives. We marry that with good Social Security planning and solid tax mitigation strategies. All that comes together through our guided retirement system.

Let Us Help

Dean Barber: I’d love to invite you to get a complimentary consultation so we can explain to you how you can gain some clarity in your financial life. Set yourself on a path for financial independence to live your life for the reasons that are important to you. Click here for your complimentary consultation right now. 

Bud Kasper: There’s a reason we’re the longest-running financial planning radio show in our market. And part of that has to deal with proper planning, and we’ve your plan. You just need to talk to us.

Dean Barber: We appreciate you being with us here today. I’m Dean Barber, along with Bud Kasper. We’ll be back with you next week. Same time, same place. Everybody stay healthy and stay safe.

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Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.