Podcast Episode - Suze School: Why You Need To Look Long Term

On this Suze School, Suze explains why when investing in the stock market, you need to look long term and be comfortable with the ride your stocks take.

Listen to Podcast Episode:

Podcast Transcript:

December 17th, 2023 Suze O here and welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. Eight days before Christmas, we are almost there.

But where we are right now is we are actually celebrating big time or you should be because last Wednesday on December 13th, the Feds pivoted. They finally have changed their stance.

They are saying interest rates are coming down and why are they coming down? They are coming down because inflation is coming down now, even though they don't expect to decrease interest rates until sometime next year, they are still coming down.

Now, what that means is as you probably saw on Wednesday, if you are watching that, the Dow Jones Industrial average, which was essentially flat. Remember the Dow Jones industrial average is one of the index that has approximately 30 stocks in it that are all industrial stocks and they're a major indicator of what the stock market is doing really was flat.

After Jay Powell, the fed chair started to speak and tell everybody his new stance on things. It skyrocketed and it skyrocketed. Like I haven't seen it really move in a long, long time and it went all the way up 512 points to 37,090 which is where it closed, which is the highest it has ever been in the history of the Dow Jones Industrial Index.

But what it also shows us that my instructions to you to stop going short term and I gave you those instructions a long time ago. Now start thinking longer term with your treasuries or your CDs three months and six months are not where I want you to invest. Remember how I started to say move out longer term, whether it was two years, five years and then there came a point where it was 20 years and 30 years and start investing longer term.

In fact, I asked all of you to do what was called a Barbell approach and a Barbell approach is that the money that you want invested in bonds that you do some maybe 3 to 5 years, maybe two years on one end and on the other end, you do longer term bonds, which happens to be 10, 20 or 30 years.

And if you had done that, even though it was just with a little bit of money, you would be up considerably right now, especially on the long end of those bonds. I need you to listen to me now.

I do think that interest rates are absolutely going to continue to come down.

I think it is very possible and probable that sometime next year you will see the 10 year treasury note in the low 3% range.

And you need to remember that mortgages are attached to what the 10 year treasury, if the 10 year treasury interest goes down, mortgages tend to follow and go down. If it goes up in interest rate, mortgages tend to follow as well. So if you are thinking about either refinancing or buying a house or whatever it may be, if I were you, I would wait, I would not be purchasing right now unless I had a steal of a deal. And if you are thinking that maybe one day you would like to sell, but you don't want to sell because you don't want to buy another house at twice the interest rate that maybe you're currently paying.

I think you will have your chance sometime in 2024. So I think all of you need to be patient back to bonds. However, now listen closely last Sunday's podcast. I said that there were $6 trillion in money market funds and short term tea bills and that as interest rates start to go down.

And now a lot of those bills or money have matured and interest rates are a lot lower than where they were. That, that money will now start to move into stocks. What kind of stocks, high dividend yielding stocks. But I wanna be clear in what I mean, the money that is in short term t bills and money market funds usually is money that you are getting a great yield without any risk whatsoever on it.

That money is not going to pour into the stock market in technology, stocks and stocks that are speculative that money, some of it may go there. But that money either will go into high yield dividend, paying stocks for some of it so that the yield can stay the same and maybe people can get some growth on their money, but it is probable that the majority of it is going to go into bonds. So the rise in the bond market is not over yet. So, no, you have not missed it. Do you understand that?

Because people are still going to be looking for a safe place to put their money and if they could put it in a longer term bond, they most certainly will. If they go ahead and they buy bonds, then they're bringing the price of the bond up. And when the price goes up, the yield will go down as yields go down.

If you're already in those bonds, then your price of the bonds that you have will again go up.

However, the other day I got an email or maybe it was on the Women and Money app where somebody said, Suze, I just sold all of my series I bonds. Now, should I buy 30 year bonds with all of that money? And I said no.

And the reason I hope you're listening, if in fact, you were the one who wrote that question, maybe you're puzzled why I said no is because no matter what I am telling you that I think you should invest in, you are not to take all of your money that you did something with or that you have to invest and put it all into a particular investment. The only way in my opinion that you should be investing during these times is little by little. That's why I said to you, if you remember that when I started to buy 30 year treasury bonds, they were at 4% then 4.2 then 4.3 then on and on and then 5%.

But I didn't take all my money and put them in at 5% because I didn't know what if they had gone to 5.6%. 6%. 7%. Anything is possible. I remember when 30 year bonds were up at 14%.

So I've learned that in times like this where anything in the world could happen at any moment and you know, that is true that you're far better off just going easy and going little by little into an investment.

The same is true with the stocks that I talk about.

First of all, none of you should be investing in the stock market with money that you need within five years.

You do not put money in the stock market just to make a quick gain and you're in there for one year or two years and then you need the money and then you have to sell, possibly you're selling when the markets are down. So any money that you put into the stock market is money that you absolutely do not need for at least five years or longer. Do you hear me next again? Any money that you put into a stock or an ETF that at least I talk about with you, you have to do it on a dollar cost averaging basis. So remember you are the one who needs to decide how much money you want to put in one particular ETF one particular stock, whatever it may be.

Once you have decided on that amount of money for that particular investment, then you need to dollar cost average into that investment over at least one year period of time.

So therefore you have $1200 you want to invest, you can invest $100 every month, you could invest $300 every three months, whatever it may be. And then once you get to the amount of money that you had decided you wanted to invest in that one particular investment, it's over and then you just hold it unless of course, something catastrophic happened with that company. It's just that simple. Now, what's interesting is a lot of, you have this thing of, you want to buy a stock and you want it to go up and you want to go up right away because it feels so good when you buy a stock at 50 all of a sudden it's at 60 now it's at 70 now it's at 80 you feel so great about that.

Why, why do you want to buy something as it's getting more and more expensive?

I happen to love Apple stock. I love it big time. Possibly. Maybe it's my most favorite stock right now, but it's at almost $200 a share.

And I just think that's a little bit high at this moment in time. It's gone up too fast.

So I will wait. I already own some of it, but now I'm waiting and I'll see if it comes down 10% I'll buy more.

But if it keeps going up fine, I'm happy with what I have.

So you can time things for yourself as to does it make sense to buy a stock that's going up very rapidly? Are you just better off waiting and seeing what happens and if it's gone up too rapidly and you've missed it? Ok. There's a lot of other great stocks out there. But you have to be patient with what you are doing.

On the other hand, if you're buying a stock and now it's going down and down and down and by the way, everything that I am saying in this podcast applies to individual stocks, exchange traded funds, mutual funds, investments like that, you have to make a decision. Why did you buy the stock? Did you buy the stock simply for the dividend? Did you buy the stock for dividend plus growth? Do you like the stock? It's not enough if I tell you that I like a particular stock because I have a very long view of a stock when I buy it. I do not buy it and hold it for just one year.

I don't buy it and hold it for possibly just two or three years.

Sometimes I will buy a stock and I will hold it for 10 or 15 years. And I am thrilled if I do like Apple, like Amazon. A lot of those stocks came out when I was a stockbroker.

Can you imagine what they're worth today? Sometimes we get into this mindset where we buy a stock, it's up 50%.

You've made so much money on it and now your fear takes over and you're like, oh, it's gonna go back down and I'm gonna lose all my money.

So you sell it and then what do you do? But then all of a sudden the stock returns and it goes way back up again. Like look at Netflix, you can see that Netflix went from 500 where I personally bought it. It went all the way up to 700 and then it came all the way back down into the hundreds and now it's back again, almost at 500. And I have no doubt that maybe it can go higher, but sometimes you just have to go on a ride with the stock and again, if you like it and it's going way down, that's when you also buy more, if you have the money to do. So, I wanna talk for a second about a stock that I do like that. I'm sure is freaking many of you out because you're all talking about it on the women and Money Community app and that stock is Pfizer.

Now, Pfizer has been absolutely obliterated when I say obliterated. I mean, obliterated. It was at $54. It's high of this year. It's at about 25 $26 now. And for now it's paying a 6.28% dividend.

I truthfully believe that eventually this stock will absolutely return and go back up. But you have to have a stomach of steel. Now, all of you started to make me a little bit nervous. I have to tell you, I have to stop reading your posts and on the Women and Money app because now it has this report, it has that report. And as you know, a while ago, I told all of you that one of my very, very, very favorite investors is a man by the name of Keith Fitzgerald. And he has a free newsletter that comes out every d ay called Five numeral five with Fitz F_I_T_Z.

Now he again, in my opinion, is one of the most brilliant minds out there the other day, I was reading as I do every single morning, his five with fits and again, you should all subscribe to it. It's free and he does a whole thing on why Pfizer may be the best buy ever. So, what I did was I copied all of his comments and on November 13th, I put it on the Women and Money Community App wall for all of you to read. So you might want to read it and see what he thinks. But here's the bottom line. It doesn't matter what I think, doesn't even matter what he thinks, what matters is how you think. Now, I'm thrilled that I see this stock crashing if it is keeping you up at night, if you don't have the stomach for it, if you just want really a stock that's kind of stable and doesn't do much, it just goes wherever this is not the stock for you. OK? So you have to make that decision yourself. Remember, you have to trust yourself more than you trust others.

The other thing that I think is really important is that maybe since I still like the 20, 30 year bond as well as the 10 year Treasury Note, maybe there is another way for you to participate in the movement of interest rates rather than buying individual bonds. But before I go on with this idea, I want to be very, very clear. My preference is still and always will be in individual bonds just that simple.

But for many of you, you write me, Suze, I can't figure out how to buy a treasury. I can't figure out how to sell it if I even get it. What else can I do? So, what I am telling you about right now is only for those of you who want to participate in the downward movement of interest rates, but you really just can't figure out how to buy or sell treasuries. Got that everybody. I hope that is clear. And Keith, if you happen to be listening to this podcast, I hope it's ok because this is Keith's idea.

So there's no way Keith or myself can know your individual situation and if this is appropriate for you or not. But if you want to invest in longer term bonds via an exchange traded fund, the Pimco 25 plus year zero coupon us Treasury Index Exchange traded fund, symbol ZROZ is something that you might want to look at. Currently. It's at $86.79 a share pay 3.74% in dividends. But remember everybody, this is a zero coupon exchange traded fund. And what that means to you is you don't get the income. It doesn't have a coupon, the interest that it pays you goes right back into the fund to be invested at that same rate. So just to summarize these things for you, here, there are certain stocks that are absolutely getting hit, the stocks in the oil industry are being obliterated. You see Pioneer Resources down from 257. It's high just about a month or two ago to $222 a share. As of last Friday, you see Exxon down at about 100 you see Devon down.

So you see these stocks that are down, you have to decide on your own. Do you want out of them? Do you want to take a tax loss this year? If they're outside of a retirement account? Do you want to go into that area again? But in possibly better stocks that you feel more secure in, you have to make those decisions.

I will restate. I do think oil will return up one day and go up. I think XLE if you have it, you should keep it, but you have to feel comfortable with it. Not me. Do you understand that? So it's just something for you to think about again? Just to be clear here, the markets will have next year, in my opinion, up, down, up down, they can go all over the place. The magnificent seven that I spoke about last week, the QQQs which give you an incredible exposure to the magnificent seven via an ETF. Even though I do expect those stocks to continue to go up, I don't expect them to go up with the same velocity that they went up last year.

I do think that you will start to see the spread of what people are investing in being far more than just technology stocks. I think most likely that you will also see small cap stocks start to go up. So maybe you want to invest in the I Share Russell 2000 ETF, symbol IWM.

And that pays a little dividend of 1.56%. But I think different than last year where those seven stocks are what drove the Standard and Poor's 500 index. I think you're going to see now, more participation in the other 493 stocks that were absolutely left behind. Now, a lot of you over the past few years have invested in the Vanguard total stock market index, ETF symbol VTI and that particular index, which is why I liked, it doesn't invest in just 500 stocks like the Standard and Poor's 500 index ETF the SPY, it invests in thousands of stocks that cover absolutely every possible group, everything, thousands that is why if you look at the return of it, the Vanguard total stock market index returned 22.12% so far this year.

But the Standard in Poor's 500 index returned 22.45%.

So it just is a little bit off, but it does give you that exposure even though just in a tiny bit of a way to thousands of small cap midcap, all kinds of stocks. So if you don't wanna do where you buy a small cap stock, you buy the QQQs, you do everything. All right, forget about it. Then you would want to focus on the Vanguard total stock market Index fund

VTI, which the majority of you actually have. So that's just something for you to think about as well.

There are other things that you should know about, which is the Standard and Poor's 500 index. The SPY is a market weighted index which means it gives more emphasis and more movement based on the market value of the stocks. So the market value of Amazon and all those stocks is far greater than the other. So it gives it more value that moves the index, the RSP, which is the Invesco Standard and Poor's 500 equal weight. ETF is an index fund that gives all 500 equal weight for next year. You might just also want to pick that up and do little by little into the RSP.

That doesn't mean that you give up SPY or VU or VTI, ETs or QQQ, but just for a little bit more diversification, you may like the RSP. But I just wanna let you know that last year, the Standard Poor's 500 index and VTI returned about 22% for the year. The RSP returned only about 10.5%. That doesn't mean it won't return more next year. But just be aware of that, that would give you a pretty round out portfolio, especially if you add it to that, the ZROZ ETF to participate where in the downward movement of interest rates.

So some of you are able to do that and some of you won't be able to do it because most of your money is in a 401k or whatever. But within your 401k, you do have small cap index funds, I'm sure. And certain things that I talked about today, but regardless of what you're going to invest in and how you're going to invest, it needs to be done on a dollar cost averaging basis. Number one, number two, you are not to invest in the stock market if you need your money in less than five years and three.

And I am gonna emphasize this when you have right now, a two year treasury note that is at about 4.44 0.3%. It touched in there everybody the other day and you can get a 5.3 or 5.35% yield on an 18 to 23 month. You choose which maturities you want when you can get that type of yield for essentially a two year period of time. If you choose the 23 month one, that is almost 1% higher than a two year treasury note.

Therefore, I don't care what state you live in that if you happen to live in a state that has a high state income tax bracket or even a low state tax bracket, the Alliant Credit Union two year CD at these rates will net you more than the two year Treasury note. Just something you might want to check with your accountant just to make sure. But I think you will find that for most of you, you can pass up that deal.

Now, as you know, I don't make a penny. If you buy them, you don't buy them. Not my problem. I'm just here to tell you the best things you should do with your money.

So why they would keep it at this rate is beyond me.

All right. Now, I forgot to tell you to take out your little Suze notebooks. So you just might have to listen to this pod cast again so that you can get everything that I just said.

All right, everybody next Sunday that Sunday's night will be Christmas Eve.

What do we do on a podcast on the day of Christmas Eve. I'm really going to have to think about that one. Anyway, so many things in the world right now. So many things that, honest to God, I wish I could change. I've often said, I wish I had a magic wand and I wish I could waive it that anybody who is hurting or anybody that is sick or anybody that's losing their home or anybody that's in war or whatever it may be. I wish I could change it all so that everything in this world would be great for everybody.

But I kind of do have a magic wand.

And my magic wand is all of you that listen to the Women and Money podcast because if all of us together just put out the energy to make this world a more loving, peaceful and joyful place. If we can just touch one person's heart, then on some level, my wish for a magic wand is coming true.

And my magic wand says to all of you, we bless you all because we know that you are all unstoppable.