Get Your Mindset Right To Invest In The Current Market (Episode 30)

Yeah. So there are many, many thoughts out there to market. Now at a discount, we were in bear market territory, not too long ago. And you know, it's very possible that we could hit that again, even go lower and test new lows for the year. You know, clients really should pull back and say, well, what does that really mean to them along the way here? Because if the money is not really needed in the short term, these are opportunities when the market has these types of pullbacks, when it's scary to get invested into the market, those have often been the good times to be making additional purchases. And so by looking at this and knowing that there's probably gonna continue to be volatility that we're seeing into the future, that's not gonna go away, but we have had a long run of positive markets. We were in historical bull markets.

Uh, yes. So it's investing becomes easy when the market just has a one direction that it's going and where the challenge is, is now when the markets are turning and you're not paying attention to how it's actually affecting your plan, whether it be your current spending, affecting your future outlook, making sure that you're looking at this in its entirety, because now inflation is kicking in. And there's some people that were thinking that just their stock portfolio will alone outpace inflation long term, that will happen. But in the short term this year, that's not necessarily the case.

They are. And when that happens, what behaviorally, what we've seen is that we start following and seeing long trends and we get caught up into those trends, right? One of the long trends that we just seen have seen right now is, you know, growth stocks have outpaced for such a long period of time that everybody said, well, we just need to be getting into growth stocks. If you remember, back in the late nineties, we did go through a significant, significant trend. That was that whole technology bubble that we all lived through at that point in time. And everybody said, all you need to do is buy these certain stocks. And many of those stocks are not even in business anymore,

That is not the case. And actually, uh, when you look at the decades and you compare the various decades through history, there's been a number of decades that value when combined with all of the growth phases actually provides for a little bit higher of a rate of return. But even what we feel more importantly, just a smoother rate of return. So you might get to the exact same average over the decades of a rate of return being in growth or being in value, but the highs and lows, the rides that you go through along the way can be significantly different. So think about that from a investor's perspective, they love it when the market's going really high, but they like it even less when the markets are going down, right? So the utility of their happiness of markets and being invested, they really get depressed. When the markets go down, like what we've just seen between the F stocks and seeing all those stocks take a tremendous hit lately, it hurts a lot more when that happens. So if we could smooth up that rate of return for clients, it just gives their investment experience just a little bit more comfort.

Absolutely. It's equity asset classes, that diversification concept, even outside of equities, to get the appropriate amount of diversification, to smooth out your rate of return and keep in mind that if your plan is saying that you're gonna need a certain amount of cash in the short term, then your exposure to the markets should be limited with that amount of cash in the short term, Chris, anything can happen. And so you really go back to the behavioral side of investors. And what we found is that investors typically have, you know, one of four main we'll call attributes to how they'd like to invest. They might be those that are more of the performance seekers. They're looking to try to outperform the markets, right? They might have a different asset allocation concept where another might be really seeking to minimize or mitigate the risks on a market downturn.

And they might have a different mix of investment strategies, even though they might have the same 60% stock, 40% bond allocation between the performance attribute and the risk attribute. It just might be composed of different types of investments. And others are looking at costs as their main driver. And the fourth is taxes. Some people just hate to pay uncle Sam an extra dime if they don't have to. So they try to mitigate their taxes within their investment strategies. So those are all different concepts that allows an investor really, to stay invested in good times and bad times when they're comfortable and they understand it's gonna meet their primary investment attribute.

It is, it makes it challenging and that gaming concept call it what it is it's gaming, right? And so, you know, over a long period of time, those that try to game the system usually have a point in time that they're gonna be challenged. And so what we say is if you could be consistent with the system, but do it potentially with less risk, if you could capture more of the upside of the market, when it's going up or participate less, when the market's going down, that's a concept of itself that meets most investors' needs.

So in all markets, even in the positive markets, and now in the more challenging markets, we feel that the opportunity to reevaluate first, your goals and your plan, what is the money being invested for? What's the purpose of it? That'll give you the ability then to strategize setting the goals of what you can handle as part of the volatility along the way, the time horizons until you're going to need the money. And then also understanding yourself of what your reactions will be in good times and bad times, we promise all of our clients, we promise you, the markets are gonna go up. We also promise you, the markets are gonna go down and that's just the reality of investing. So we just wanna make sure that we're going to meet your goals in both scenarios and that's our job. And so investors today should really be looking at it saying, well, what are my goals?

And how do I structure a concept of investing? That's gonna help me achieve those goals in as many market scenarios as possible. And that might not be just all in one type of equities. We would not recommend that you get the diversification they need between equities bonds, even though bonds are being challenged, there's still ways of getting exposure to bond-like investments. That's going to reduce your volatility inside your portfolio, as well as utilizing other strategies that are out there that might even provide additional stability to the portfolio like bonds and make sure that when the markets are changing, it's not just simply riding it out. It's riding it out and being proactive to take advantage of the market situation. So one of the things that people should be looking to do is, well, maybe we should be harvesting some of the losses in the portfolio.

So you can increase your tax efficiency now and into the future and harvest some of those tax losses. And that gives you tax out for a tax book loans. Another thing is to make sure that you're reinvesting. And if you could buy into these dips in the markets, these are great opportunities to continue buy lower. If you thought it was a good investment, eight months ago, and now it's down 20%. Well, it's now a better investment potentially. So buy more of it if you can. And third is that if you have the ability also, and if it makes sense, according to your goals is if you could have your stocks pay you rent, that's utilizing dividends along the way there. And you have those dividends being reinvested in the portfolio. They're buying more shares at this point in time at a lower cost. And that's another opportunity is to have those dividends paying to you and or to your portfolio for reinvesting,

Correct? If there was a way and if someone could find it, please gimme a call and let me know that you could time the bottom of the market. I'm all in favor of that. Uh, just like if you could time the top of the market at that exact point in time, I'm all in favor of that.

Absolutely figure in. We got you covered. So, but the reality is this is that proper strategies and rebalancing reduces your risks over a longer period of time allows you to take advantage of the highs in the markets. It's very easy for an investor to feel confident in saying, all right now, if I had just simplistically saying a 50% stock, 50% bond portfolio over the last five years, if you did nothing, that stock portfolio would've grown to close to 65, 70% of your portfolio. Now you're taking on more risk. Well, if you rebalanced along the way, stayed consistent to that. 50 50 allocation of stocks to bonds. You'd be more protected. Now when the markets do change, now that the markets are going down and now you might have 30 or 40% of your portfolio allocated to stocks. When now is an opportunity to buy into it, to get back up to the 50, 50 allocation. Just the, again, the clients investors, I should say sometimes feel uncomfortable because they know the market's going down and everyone in the media is going to be selling the concept of how challenging the markets are and it's going to get worse. Cause that's what sells. And I understand that, but start buying into the markets. Now doesn't have to be all of it. Start dollar cost, averaging, start rebalancing the portfolio. So you could buy into the dips

That's exactly right. So unless you're an actual day trader, which you're trying to trade the stocks, which most investors should not be doing, unless that's their full-time occupation and trained properly and doing so, but most are not, then they should be consistent with a strategy. That's going to allow them to have a plan. That's going to work. Like I said in good times and bad.

It's not. If you look at the energy sector, you're seeing companies like Exxon and Hessam, they're up 50, 60% for the year. Some of the pharmaceutical companies, uh, you are having positive rates of returns along the way here. This is all part of the diversification. And if you think about it, those are the differences between they, those are segments of the markets that if you were fully diversified and you had both growth and value as part of your portfolio, those are the value type typical stocks that are now performing and now performing the growth stocks. And they have the higher rent checks. I E dividends that they're paying out along the way too. So these are all part of why you wanna have a strategy that matches up, don't play the sector vet because then you might, you know, unless you're looking to hit a home run, which most investors you have to be willing to strike out. Then if you're gonna try to seek for a home run investment strategies, maintaining that consistency and a diversified strategy is going to play out and you'd have exposure to companies like this.

Right? So, you know, if you have cash at hand right now creating that diversified strategy, which would include still some of these segments of the markets, but it would also include others such as some of the areas that have not performed as well, such as the, some of the growth stocks. Your purpose is to get the main, to obtain and maintain the diversification in the portfolio. And that's part of the whole rebalancing strategy. And if you have cash is the dollar cost average at over time, we, we feel strongly about that. And especially in these markets, it helps to prevent a black eye in the short term.

That. That's correct. There's systems and tools out there that can help individual investors out there in the marketplace and online. But even there, they might not really understand what they're looking at. Some clients they feel if they have eight different mutual funds, as an example, as part of their portfolio, they're diversifying just because they have different names and different companies and they don't have put in quotes all their eggs in one basket. But when you look under the hood of saying, well, what's your top holdings within each of those mutual funds and they're all the same. Are you really getting the diversification of all those stocks that you have all the same stocks within the eight different mutual funds that you now you more simplistic and received eight statements, eight prospect a year and all this just by one then. But the point is to look for strategies and get seek advice. That's going to confirm that you have an appropriate amount of diversification. That's still based upon your goals though. Not just saying, I wanna invest for the sake of investing because then you don't know really what you're targeting for and you're on the road with no math.

Can't they that's correct. If you like to be the person in charge of the actual implementation, there's nothing wrong with that. As long as you have the systems to follow through and keep up with it. And you're using the support mechanisms that are out there, which there are advisors that we provide services that you just looking for guidance at this particular point in time regarding this topic and we're facilitating that specific review or that need, that's absolutely fine. As long as again, that you're able to follow through, you're able to take the emotions out of it. So when the markets are doing poorly, that you are rebalancing at the appropriate points in time and that whole emotion and behavior side is really becomes the most challenging part for a lot of people because that override,

It does based upon the markets. And that's why we try to isolate the conversations with clients that I say is performance, risk, cost taxes, which is your main attribute right up front to determine how you should be strategizing. And, and with those same clients that say, I wanna move the cash. Now that the market's down, you follow up with the additional question was okay. So if we do that, when would you like to get back into the market? And the reaction is very consistent. It's well, when I feel more comfortable or when I see something's changing and then we often say, well, by the time that happens, the market's already gone back up for you to feel more comfortable to get invested and you missed it. And you saw that back in 2008 into nine, you saw that again in 2020 for that short period. I mean, fortunately it was such a quick turnaround that many clients couldn't react to their emotions. And so they were able to avoid that knee jerk reaction. But it's part of our role is to make sure that we're keeping clients consistent with their game plan in all market situations. And that helps alleviate some of their emotional knee jerk reactions.

And it was a huge upswing, right. From that point in time going forward. That that is correct.

It absolutely is. And listening to the neighbors of what's worked for them, we hear that all the time and that's not you. And to focus on things that are really in your control, right? I mean, as investors or what are the, a, the mechanisms that you really can control are really five things you could control your spending and how much you wanna spend on any particular item or your needs. You could control your savings of how much money you're putting away. You could control the risk tolerance that you're willing to take on truly in good times and bad times, challenging times you could also control the timing of some of the situations. You know, the timing of when you're going to retire timing of when you're gonna buy the house, buy the boat. These are things that are in your control. And then lastly control the amount of legacy that you wish to leave behind. These are elements that you have a direct influence. You can't control the markets. So how do you create strategies? That's gonna give you the best opportunity to accomplish your goals in all markets and focus on that.

Sure, sure. Thank you. Kay. You could reach us right through our website, www dot Eisner, E I S N as in Nancy, E R Amper a M as in Mary P as in Peter, E R WM for wealth management, CB for corporate benefits.com. So Eisner Amper WM CB do hamper wcb.com.

Thank you. Very