January 27, 2019
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In today’s podcast, Suze wants to have a conversation on the stock market.
Suze Orman here and welcome to the Women & Money podcast. Today. I want to talk to you about the stock market. No, no, don't freak out. I'm not gonna get too technical on you. But you see me. And you say to me, Suze, what should I be doing? Should I be selling? Should I be buying? I'm so afraid Suze. This is all the money I have. I don't know what to do. Tell me, Suze, what do you think's going to happen with the stock market? And I'm here to tell you, I have no idea. Nor does anybody else, really. Because what you have to understand, is that anything can happen out there that affects the stock market. So it's not about, what do I think about the stock market, it's about how does the stock market make you feel. Remember, the goal of money is to make you feel secure. And if this is your money, I don't care how much time, how what age you are, anything. All I care about is this. How does the stock market make you feel? You need to answer that question. Because if you are scared to death, scared to death, I'm here to tell you fear is one of the main internal obstacles to wealth. Oh you will buy at the wrong time, and you will sell at the wrong time. Now how do I know that's true? Let me tell you a story. It was years and years ago in the 1980s, when I first became a financial advisor and worked as a stockbroker. And when you're a stockbroker, when your financial advisor, you build what's called a book. And a book is people that become your clients, and you usually pick four or five stocks, whatever they're your favorite stocks may be, and you put all of your clients in those stocks. So I started to realize, and this was before computers. I started to realize as I was writing in what's called my book, it was a black book, in fact I wish I had saved it. Anyway, as I was writing in the black book, every client that said yes, they would buy 100 shares of XYZ stock at this price. And then we would sell it, and I would see did they make a gain, did they make a loss? I would be able to tally every single one of those before again it was done automatically. And I started to notice that all the same people made money on that one stock, and all the same people lost money on that stock. And then I started to look at my other stocks. And it turned out that again, the people who lost money on that stock were all the same, and those that made money on it were the same. And I'm thinking, how is that possible? What's going on here? So I decided way back when, to call all the clients. And here was the question that I asked them. I asked when I called you and told you that I wanted you to buy XYZ stock, why did you buy it? And the ones that all had lost money on that stock told me, well, I was afraid to say no to you Suze, I didn't want to hurt your feelings. So I just said yes. All the ones who made money on that stock, when I asked them that question said to me, oh I thought it was a great idea. It made total sense to me. Now you may be wondering how is it possible that if you buy a stock some people make money and some people lose money. Here's how. You buy a stock for everybody at 30. And it goes down to 15. And all of a sudden your phone is ringing, and many people are saying, sell the stock. I don't want it anymore. Sell the stock, sell the stock. I don't care. I think it's going down even more. So you sell the stock for them and they have lost money. But you don't hear from many of the other people and you still like the stock as a financial advisor. So you're not going to call them and say anything. And then the stock goes from 15 to 17 to 30 to 50 to 100, and it keeps going up. So then, you have people who maybe want to sell, they made money on that stock, while others lost. Now, I hope that is clear to you. That is when I started to realize that fear when you're afraid of something and you do something when you are afraid, you will buy at the wrong time and you will sell at the wrong time. And I have carried that lesson with me throughout my entire investing career in terms of advising people what they should do. Because I can tell you, no it's okay, it's going to come back. But if you are afraid, you will end up selling. So I just need to know because maybe things have changed here. You are. Did you relate to that? Yeah, I mean, unfortunately I related to it. And I think, you know when I first started dating Kevin, actually, he's a he's a CFA. Um and he is in private equity now, and he does lots of investing in stocks. And I didn't know much about it. I had done all the classic normal things, I was ready to make some investments and he said, okay, how about this stock? And I said, okay, put $20,000 in an Etrade account for him to buy, and he said this stock and I didn't ask a lot of questions. But when he said, when he said to you, how about this stock, what did that little voice, you know, I always say to everybody, we all have this little voice, it's about at our belly button in our stomach and I actually think it's the voice of God telling us when to do something and when not to do something. When he said to you, let's do that, was your little voice in your stomach saying no, no, no, I don't want to, no, it's not for me, whatever? Yeah, my little and actually it sounded like Suze, just so you know everybody, it sounded like you saying don't do this. Uh no. Yeah, the voice said, no, don't do it. I didn't know enough. And I don't, I wish I understood why I felt fear and asking more questions. Um but I did, I felt fear. And and I'll tell you, I feel like I'm in a really supportive relationship. He wasn't twisting my arm to do something. I just, I did it. And then guess what? The stock went down, down, down, down, down, down, down. And this is in the early parts of our relationship. And I felt sick to my stomach even more than I originally did. And let me tell you, he felt pretty sick to his stomach. There's probably no worse feeling. And I'm guessing you've had this feeling once or twice before losing somebody else's money. It’s not a good feeling. Um, so guess what? I sold and I lost my $20,000, gone. So you let it go almost all the way down to nothing. Yeah. And the stock came back by the way. And did Kevin sell his? Or did he keep it? No, he kept it. Because he believed in it. He was like he was trying to teach me this lesson that listen this is where I've been, he's been in the stock for a long time. And now the stock is doing really well and he's you know 10x his money. And that is 10 times everybody. Right. And you lost. So that's what I'm talking about. So you've experienced it when you do something out of fear, when you do something out of fear, you always sell at the wrong time and buy it the wrong time. So one way that you can get over that fear if you have fear is not put all your money into something all at once, you can take a sum of money that you feel comfortable with, $200 a month, $100 a month, whatever it may be. And just put that away in a diversified mutual fund. Again, when it comes to stocks, individual stocks, I'm asking you all to be very careful because to get true diversification, you should not have more than 4% of your money in my opinion, in one stock. So you would need at least 25 stocks. Individual stocks for you to be diversified and that may just be a little bit much for you. You know, Sarah there's so many ways that we could go here. You know when I think about stock market jitters and you said something you said, I must know what that feels like because you know you're a stockbroker, Suze, you lost people money and I most certainly did. I gave them recommendations that went down, some went up. It's impossible not to, but you know what I realized about this stock market jitters is, financial advisors get stock market jitters as much as anybody. Imagine yourself, you're a financial advisor, you're a stockbroker. And maybe you have, if you have, if you're a really great one, you have 500, 1000 clients. And the market now is going down, and down, and down. And now your phone is ringing off the hook. With not just one person or two people, but hundreds of people saying Suze, what should I do? What should I do? Oh my God. And you your own money is invested in those stocks. Now, all of a sudden, their jitters, all of your clients jitters have made you jittery, because what if you're wrong, are you right? So that is why you need a financial professional, if you are using one, that has been in this industry a long, long time. Somebody who has expiry down markets, up markets, down markets, up markets. And they now have perspective, so that when everybody is calling them, they have the emotional maturity not to let other people's opinions affect what they know professionally about the investments that you are in. So I just want you to think about that. When you buy a mutual fund, you don't get to talk to the portfolio manager, the person who buys and sells the stocks within that mutual fund, because you would drive them crazy. But that's why if you are using a financial advisor, it's not just about should you be investing in the stock market or not, but who are you using who is also advising you about what you should be doing in the stock market? How long have they been doing this? You need to know their track record, and their maturity, and how they feel as well. That's a big deal. Because I used to call that the broker jitters. I saw it happening all the time when markets would crash around me. All the time I saw their financial advisors going, oh my God, oh my God, I just got, you know, 100 calls today. And I'm just so confused, I don't know what to do. Well, I mean, I think it goes into everything. The, the thing about investing, you've told me this before, investing means you're going to be proactive with your money, being proactive with your money means you're learning, you're paying attention. You're understanding where you're putting your money. And that was my big mistake. I didn't understand, I didn't ask any questions. I don't I was afraid to ask questions which is completely ridiculous. And now, I learned from that lesson to ask a lot of questions about what I'm doing with my money. But more than just asking questions though Sarah, you also have to be in touch with what you need from your money. You know, the truth of the matter is, and I always say this to people. So, so you listen to me. Which is, if you have time on your side, because I'm gonna say this again if you need your money within three years, you need it for a down payment on a home, you needed to pay off your student loans, you needed to put a new roof on your house, you need it for whatever. You need it. And you need a lump sum of it. Then that is not money that belongs in the stock market. So that is money that you really need to come out of the stock market. Obviously check with your CPA first, and make it safe and sound. You know years ago, you didn't have a choice if you came out of the stock market because what were you gonna do with your money? Interest rates were essentially at zero. Now you can get 2% or higher in certain savings accounts. So you can stay safe and sound if you need to, and not get 0%, but get a medium kind of interest rate on your money. But what's really important is if you have longer than three years, five years, 10 years and you're okay, you're feeling secure, you should be wishing and praying and hoping that this stock market goes down. And it goes down and it goes down and it goes down even further. Because the more it goes down, the prices of the shares of let's say your Standard and Poor's 500 Index Fund that you purchase goes down. The cheaper those shares get, the more shares your dollars buy every month when you're dollar cost averaging. And the more shares that you have, years from now when the market does return, that's when you start to make money. So you just have to have a plan of action. Either the stock market is for you or it's not for you. Either you feel secure or you feel insecure. If you feel insecure, what actions can you take so that would make you truly feel secure. Not pretend, but really. And then you know what to do. I just have to tell you one more story. KT drives me crazy every time I invest in something and she invests her money as well. And it goes up dramatically. She says sell it, just sell it Suze. We made good money. And I said I am not selling it. I want to keep this because this is a stock that I want to own for the long run. Not just for one year or two years. I want to own it for 10, 15 or 20 years. So I'm keeping it. And then whatever she would do, she would drive me crazy. So I don't allow her now to talk to me about the stocks that she has and the moves that she makes. She just has to do it on her own. Because her indecision and her fears start to merge into mine, and then I start to make mistakes with my money. And so we keep that separate, just so you know. Are you surprised to hear that? No, because I know well, first of all, I know your personalities, and I know I know the differences in them. But I also know how you guys have decided to do your finances, which by the way is a whole another episode that we need to get into. Because I think you've got great advice for people on financial independence which was which was last week, but going forward there's also a lot of topics around relationships to that I think are really important that you can share anecdotally. Love and money, love and money. We're gonna have to let's do something about that on Valentine's Day. Oh that's a great idea, let's do that. So why don't we do this Suze. We need to get questions from our our friends out there and and not assume what they want to know, even though here's what's gonna happen. I just want to call this this play on the field, is we're gonna get in all these questions, and every single question Suze is gonna say, I know that that's what they were going to ask. You could have just asked me those questions. Even if I did, I'm going to say that to you just to drive you crazy just so you know. Welcome to the world of S.O. and S.O. So alright, did you tell them yet? Are you going to tell them to do this? I'm gonna tell them again. You can email us at email@example.com, or leave us a voicemail at 877-545-SUZE. 877-545-SUZE. And I think you all know this by now, but it's S-U-Z-E. And that's it. We'll talk on Thursday. See you soon, everybody. Bye bye.
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