Podcast Episode - Don't Panic Yet

ETFs, Finacial Planning, Financial Advisor, Financial Security, Investing, Stock Market

November 28, 2021

Listen to Podcast Episode:

On this podcast, Suze explains why the Stock Market dropped this past Friday and what the impacts of the new variants might mean to the economy. Then, Suze talks about keeping perspective on your investments and why remaining calm and diversified right now will benefit you in the long run.

Podcast Transcript:

November 28th, 2021. So very, very early in the morning this morning because today is the Wahoo tournament on the island that I happen to live on with KT and Colo. And normally, I would be on the boat with everybody and we would be participating. But for this year as well as last year, I don't think my body is quite ready yet to participate in a tournament even though I do get to go on the boat every once in a while now. I just thought it would be far, far better if Colo and KT went for it themselves. I already got a text that they have one on the boat. They need 3 Wahoos. You all know what a Wahoo is. I've said this to before what they are, but they have to have three Wahoos on the boat just even qualify for the tournament. So, my fingers are crossed for them and this is a tradition that we do every single year around Thanksgiving. So, I also hope that your Thanksgiving was a great one and that you enjoyed the food and everything and that you found many things that you really could give thanks for. I did take pictures by the way of some of our Thanksgiving and I've posted them along with a picture of Colo's outfit for his wedding day on December 20th and if you want to see them, just download the Women and Money app by going to Google play or Apple app, search for women and money and bam you can see them there. All right, we have quite a bit to talk about today and we have a lot to talk about because of what happened on Friday in the markets. Friday, the markets signaled that they were not happy with the possibility of the new strain of Covid called Omicron from South Africa. And you can see that this is affecting the entire world, all of a sudden we're going to shut down again. People being able to come from South Africa and other places into the United States of course, unless they're residents. You know a lot of places, Europe, everybody is getting nervous again and when people get nervous, what happens? The markets show it, because when you get nervous with things that are about to happen, what's the first thing that people do? They sell, sell, sell, sell. Like even KT said to me that morning on Friday because I said KT, these markets are going to open up down, big time down. She said sell, sell, sell and I said no we're not selling. She said then what are you going to do? Are you going to buy? And I said no, I'm also not buying, I'm going to wait till Monday. I'm going to wait and see what happens here. However, this is the time I need all of you to keep your cool when it comes to your money and let's just kind of review what happened. So on Friday markets worldwide plummeted, they plummeted anywhere from 2% to 3.5%. Now I tell you that in percentages because that is still a relatively small percentage to go down. I know like for the Dow and you know for the S and P, they went down 105 points 100 some odd points for the S. And P. That is not a huge amount down. I remember having this talk with you, you know, back in March of 2020 saying just stay cool here, don't do anything, let the market settle out and then let's see what happens and hopefully you listen to that and look what happened since then. So, Friday really was however, a black market where almost all stocks were hit. Do you know? In fact, the Dow suffered the worst Black Friday selloff since 1931 and the S&P suffered its worst post-Turkey day ever in the history of the Standard and Poor's 500 index. But listen everybody, it wasn't just stocks, it was crypto, it was oil, and like I said again it was worldwide and if you look at the stocks that were really hurt, you can see what's happening here. We're replaying March of 2020 where everybody is afraid of, people are going to stop shopping, people are gonna stop traveling, people are going to stop going into hotels, things like that. So, for instance, Macy's the stock, Macy's which is a retailer was down 5.20% on Friday, United Airlines was down 9.57%, Royal Caribbean was down 13.22%. So, stocks like that were hit seriously. But you know, there were some elements of the market that were not hurt. In fact, they had tremendous gains even though the stock market went down on Friday. Stocks like Moderna, the maker of the vaccine was up 20.57%, Pfizer was up 6.11%, you have stocks like Curevac which is also with vaccine that was up like 13%, you had quaddel which is a company that does a lot with testing and things like that, that was up 9.99% and then you had zoom that was up 5.72%. So, what does that show you? It shows you that people have immediately flipped into: get rid of the retailers, get rid of the airlines, get rid of everything that consumers won't be able to do if this virus ramps up again and get into stocks where if the virus ramps up again, that will profit just like they did back in March. Do I think that's smart? I have to tell you, I don't. I think that is reactive and you're reacting to soon. So where do you go from here? What is it that you do? And what does this really mean for you? It means that I want you to keep things in perspective. Don't lose perspective right now, and let's go back and just think about where are you where are you in your portfolio compared to where were you possibly in March of 2020. So, what I want you to think about is this and I want to thank you to think about, oh my God, I just lost all this money. And now, what am I going to do? I want you to think you didn't lose money from what you invested, maybe you saw some of your portfolio go down. But you didn't lose money, you just lost some of your profits like so, for instance, here's what I want you to keep in mind, even though the Standard and Poor’s lost 2.2% on Friday, it's still up 20% on the year. In fact, did you know, since March 20th of 2020, the standard and poor's 500 index has essentially doubled, you all do know what the standard and poor's 500 index is right? You know, that that is an index made up of 500 very large stocks that most analysts and pundits really follow more than the Dow Jones industrial average, which really only covers 30 stocks. So, you have all kinds of indexes out there, but really the most popular that everybody quotes is, the standard and poor's 500 index because it's a really good representation of the entire stock market. So, you're still possibly up, double from 2020 depending on what you were invested in, as well as you're still up 20% on this year in most cases. Now, I don't know did you buy individual stocks or did you buy exchange traded funds? Did you buy mutual funds? What did you buy? But this is a good example of why diversification is so key because so many of you maybe just buy individual stocks and while that may be fine. What's important is you need diversification, and one of the very best ways to get diversification is by buying a mutual fund or an exchange traded fund. That is an index fund such as the Standard and poor's 500 index, or the Vanguard Total Stock Market index, which covers thousands of stocks. The symbol for the ETFs, Exchange traded funds, for the Standard and Poor's 500 index is SPY and the symbol for the Vanguard total stock market index ETF is VTI. Now those are two exchange traded funds that I have been telling you from day one, if you don't have the money to diversify and own at least 20-25 individual stocks. The best thing that you can do, honest to God, is what? Own an index fund. But a lot of you a lot of you when it comes to investing, you actually either like buying individual stocks or you do what? You use a financial advisor that buys individual stocks for you or you use a financial advisor that buys mutual funds for you. And that's part of what I want to talk to you about today. All right. So, we already know that you're not gonna freak out. We're going to see what's happening here. Remember the rule of thumb, money that you need within 1 to 3 years is not money that belongs in the stock market. I've told you that time and time again because anything can happen. We all thought everything was opening up. We all thought everything was OK again and here we go, possibly, who knows what can take place. And that's kind of your attitude that you should always have when it comes to investing. You invest with the knowledge of you have time on your side, you don't need this money for 5, 10 or preferably longer years. This is money for your future and that this is money that no matter what happens if you are invested properly, you could withstand things like might happen now or happened back in March 2020 or whatever it is that comes your way, because time will eventually fix it. But what concerns me is that recently, I got an email from somebody who is investing with a financial advisor, and this financial advisor is charging him 1.25% to manage money. And what that means is that this advisor gets 1.25% of the amount of money that this person has invested with them, got it. So, that is an expense and that can have really tremendous effects on your money when 1.25% of your return is going out from day one. So, you want to know that if you have a financial advisor that they're really worth their weight in gold and that they're worth at 1.25%. Now I think 1.25% for a financial advisor to manage your money is way too high. I would never pay more than 1% and preferably I want you to pay less than that. However, if you're going to pay an advisor 1% or 1.25% to manage your money, the last thing you want them to do is to take that money and put it in mutual funds. Because if they take that money and put it into mutual funds, you're also paying a portfolio management fee known as an expense ratio when you look up your mutual funds to the manager managing that mutual fund. So, really what is that financial advisor doing? They're picking mutual funds for you. I don't think so. I don't think anybody who pays an adviser a fee to manage their money that that advisor should be taking that money and doing what with it, putting it in mutual funds or even exchange traded funds? Why is that? That is because you can do that on your own. You don't need to pay anybody one or 1.25% to put your money in mutual funds when you very easily could take that money and put it in an index fund such as the Standard and Poor's 500 Index fund or the Vanguard Total Stock Market Index fund or ETFs for both of them. And pay maybe a portfolio management fee for that of .003% for the manager to manage that Index Fund. But no, many of you like this person who wrote me, you hand your money over to a financial advisor, pay them a high investment advisory fee and they put the money in mutual funds. What a waste of money. I don't have a problem with you using a financial advisor that charges you a fee to manage money, but then that person needs to be able to do far better than what the standard and poor's 500 index fund does. Otherwise, why are you paying them? And they should probably do better by at least 4% or 5% than what other Standard Poor's 500 Index fund, does they do that normally by buying individual stocks, diversifying you knowing what to buy what to sell and really managing your money. So, this person who wrote me asked me and they said Suze, do you think 1.25% is too high? And I wrote back and I said, well it depends on what you're invested in. They then sent me all their mutual funds that they're invested in, and many of them had a high portfolio management fee or expense ratio, number one. So, on top of the 1.25% fee, they were paying the advisor, they were paying a bit of money as well, far more than what an index fund would cost. Two the fund manager as well, but then I started to look at the returns of these mutual funds and there was only one mutual fund out of all of the ones that this person sent. That had made money and sure they were up 28% on this one mutual fund, but all the others had essentially either lost money or didn't make money on the year. On a year that the market was up 20%, are you kidding me? So, it's really important that you understand that investing can be far simpler than you have any idea. You write me and you go, what should I invest in? What should I do? If you don't know what to do if you don't have a really great financial advisor who buys individual stocks for you, diversifies you and that they're consistently outperforming the standard and poor's 500 index fund. Than just buy an index fund just that simple and then your life could be made easy. And the reason why I still like dollar cost averaging is that you never know when something like last Friday could happen and maybe last Friday turns into again something on Monday and Tuesday and we find out, and we get really bad news that this strain is more serious and more, you know, transmittable and not being affected or tamed by any vaccines than any of us had any idea. So, you always have to be prepared. And the best way to be prepared is through dollar cost averaging. Now, I know a lot of you don't like to dollar cost average and you don't like to dollar cost average because essentially if the market is going up and you're putting money in every single month, then now you would have been better off doing a lump sum when the market was lower because as you're putting in money every month, you're dollar cost averaging up versus dollar cost averaging down, if the market starts to go down. I get that, but I don't care. I care that you're disciplined. I care that you consistently put money in, that you just don't put money in when the markets are low. I care that you just don't take money out when the markets are high. I care that consistency in good quality index funds are good quality, diversified, at least 20-25 different stocks and you're putting money in every month and you have that discipline that you will be able to withstand days like Friday or times when the markets are going down and then you know, you just keep doing it. But so many of you are making wrong decisions like the person who wrote me, because I do think that this person who wrote me made a mistake investing with this particular advisor, when they could have done better all on their own. So, those are just things that I want you to think about. Especially if you are afraid, you don't know what to do or last Friday really scared you. Please remember that March 20th of 2020 scared the heck out of everybody and aren't you glad that those of you who have time on your side just stuck with it. One other item that did profit with this was gold, gold was up. So, it wasn't hurt because when people get afraid they go to gold, I did find it fascinating that Cryptocurrency was hurt as much as it was and I loved the fact by the way that oil went down considerably, although I doubt highly you're going to see that in the gas stations for a while. But oil also went down because they got afraid that not as many people are going to be traveling because of this. So, oh they can't gouge us anymore. So, there's so many things happening up down all over the place. But in general, I just want you to still stay patient and let's see what happens. And again, look at what you have not at what you could have had. Okay, you're still doing great this year, know where you are, know how much money you've made, check your statements. Is your advisor doing well for you? Are they not? Are they worth their investment advisory fee? These are things that you need to know. You need to ask questions and hopefully I've answered some of those questions on today's podcast. So, there you go. I still haven't heard any more from KT and Colo. So that probably means they haven't caught any more fish yet. Let's just like I said at the beginning, keep our fingers crossed for them. There are 20 boats in this tournament. And boy, I would love if they won. Also, for those of you who celebrate Hanukkah, we wish you a very, very happy Hanukkah starting tonight. I love Hanukkah because I get to use my grandmother's Menorah and I just love that. I light the candles and I always think of her and I think of my mom, and I think of the great times we all used to have and hopefully they're up in heaven having a great time and shining their lights upon everybody. All right, so, until Thursday when Mrs. Travis will join us again, hopefully a tournament winner. Just know that we really want for all of you to simply stay safe, strong and most of all stay secure. All right. Everybody see you Thursday. Bye, bye.

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