On this special episode, Karl takes some time to discuss ways you can be successful investing in the markets even when times get rough or the stock market is volatile.
Hey everybody, welcome to the Eggerss Report as your investing playbook. Thanks for joining me, we appreciate it. As always our telephone number is (210) 526-0057. Our website is eggersscapital.com. E-G-G-E-R-S-S capital.com. I also have a Twitter handle @KarlEggerss and go check out my You Tube channel it’s youtube.com/KarlEggerss. We’ve been doing some video, probably six or seven months, a lot more video. They’re usually four or five minutes and they cover everything from investing tips to financial planning tips. It’s a lot of tips, a lot of things that … Really meaty things that hopefully you can use, and we’ll help you out and if you …
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So many of you again have reached out to us and you know I talk about people who have been listening for several years, literally over a decade. And before podcasting was podcasting, and it’s interesting that I don’t even know you’re lurking in the weeds and then people will call me, and need something or we discuss something and they say, “I’ve been listening for over 10 years.” So appreciate it, very, very, very nice. I think I do have, and I’ve mentioned it before, I really do think I have probably the most loyal and long standing audience, as far as podcasting that I’ve ever seen. And I’ve talked to people that have podcasts, most of them have been doing podcasting for three or four years or something like that.
We’ve been doing it over a decade and many of you have been listening from the get go. Very cool. But of course we get new listeners all the time, because this reaches around the world. And so if you’re new, welcome aboard, let us know who you are, and again join the conversation. Because it is a two way street, I answer questions all the time on here. Sometimes I’ll just email straight back and don’t answer on the podcast if it’s real specific, or there’s some information in there that may not … That you may not want to be shared on a podcast. Of course when we do that, I don’t share anybody’s name regardless, but anyways.
Okay, so. I wanted to spend some time today, kind of get away from the day to day happenings in the market, because again we spend a lot of time kind of going over what happened in the prior week, what’s going on, what’s moving your money. But when we have volatility like what we’ve had, over the last several months. We’ve had a lot of volatility, right? We of course really from the fourth quarter on. Up until the fourth quarter of 2018, was kind of smooth sailing wasn’t it? We had a little bit of turbulence in early January of 2018, a year ago, but really the fourth quarter is when things really got dicey, and just fell off a cliff in late December. And you can chalk it up to a lack of volume, people on vacation, so you know, you have not as much volume and because of that, you tend to get more volatility. That’s fine, we can chalk it up to that.
But regardless, when you have that much volatility, volatile markets can really bring out the worst in us, regarding our investment decisions. And a couple of weeks ago, I think I talked a lot about some of our biases we have. And we all have them, where either the way we’re wired or our experiences really dictate sometimes how we save money, how we spend money, and they also dictate how we invest. If you want to listen to that, there’s a link in here we’ll share. It’s very useful information, but those biases really manifest into something really nasty when there’s volatile markets.
So I wanted to give you a few tips, what to do when we have volatile markets. Because we will again, that’s part of investing. That’s why over the longer term, you get paid a premium to own stocks, because they are more volatile and riskier than a bond or money markets or cash. But they also pay us the most if, we do things the right way, and we stick with it. So the first thing I would say is if we experience or win, we experience volatile markets again, the first thing I would say is start with a plan. And sounds a little cliché but it’s financial planning 101, baby. Right?
It’s start with a plan. I mean, you know if somebody comes to me and says, “Hey, I have a half million dollars, can you help me invest it?” What’s the first thing I do? Do you think I say, “Okay, here’s what I would do with it.”? No, the question is, it’s really multiple questions and we do this with everybody we meet that is in that situation. We say, “How old are you?”, “Are you married?”, “Have you got kids?”, “Are you planning on leaving this money to the kids?”, “When are you going to use this money?”, “Tell me about your investment history.”, Tell me what you did in 2000, the dot com bubble.”, “Tell me what you did in 2008, the financial crisis?”
We’re starting to get to know them, to really understand their history, where they came from. Have they ever invested in stocks before? Where did this money come from? What are their spending habits? And some people we need to do a comprehensive financial plan for those folks. We need to literally go through every little detail, and I’m not saying their car insurance policies necessarily, but from a cash flow perspective. We’re getting all that information and then getting some of their history. How did they get here? So we really get to know them and then we figure out, “What are you wanting to do?” What are you wanting to do?
And I have had very specific situations before. I have one client who wants to leave a very specific dollar amount, no more, no less, to each of his sons. I have some people who say, “You know what? My kids, they’re maybe better off than me, and so I don’t care if I spend every penny of it. And whatever they get is fine.” And then we have some people who say, “I don’t want to leave my kids anything. I don’t want to leave them anything.” Those are all three different outcomes, and will affect how we invest the money. But are there weddings coming up? Are there special needs in the family?
So those are … Those are … That’s what we do. That is gathering all that information and then coming up with a plan, it’s again it can be a very simple plan, or it can be very exhaustive, comprehensive financial plan. But regardless, we have to come up with a plan to determine what to do with that money, right? And I do see this, and it sounds like you may think that’s not the case, but I meet a lot of people who do not have a plan. They invest money based on, I don’t know, could be, listening to a podcast. And it could be listening to an insurance salesman from their church. It could be listening to a bald guy on TV that throws stuffed animals at the screen. It could be all of those things. Those aren’t good reasons, right?
You should … I mean it is fairly scientific to invest somebody’s money based on their situation. There’s a little bit of finesse involved, but it’s pretty scientific, because we have a lot of data behind us to say, “Look, somebody in your situation, this is what works mathematically. We know this works. You should do this.” “You should do this, this and this, and you should invest your portfolio like this.” Because given the last hundred years, this is what it would have done and this is what we do. What gets in the way, is people’s emotions, right? Situations pop up where you have to adapt the plan. But primarily it’s people’s emotions, that’s what gets in the way of this.
So we try to set up a plan, and once you have that plan, then you can start moving forward. So that’s step number one. Start with a plan. You need help doing that, we can certainly help you, but have a plan.
And then secondly, I think you want to bridge the gap, and I kind of mentioned this a little bit. But bridge the gap, number two would be bridge the gap between with your comfort, your willingness to take risk, with your ability to take risk. Okay? I may meet a … I may meet somebody that has invested in CD’s their whole life, right? And they won the lottery. And so they have 10 million dollars. Their ability to take risk is pretty high. They could lose a million dollars, or they could lose five million dollars. Probably wouldn’t affect their lives. But their history is that they have invested in CD’s their whole life, so I know they’re a pretty conservative person.
Now there’s other people who say, “I need to do this, this and this. I have to retire. I got take care of a mother-in-law.” Whatever the case, and so to get from A to B financially, right? To get there, you’re going to have to do this. But I’m not comfortable doing that. Okay, that’s where, as an advisor, we have to bridge that gap. We’re going to have to take you out of your comfort zone a little bit and then maybe we’re going to have to back down what we would have done, if those emotions weren’t involved., and we’re going to have to bridge that gap.
So bridge the gap with … Between your comfort, and what you need, right? It’s the willingness to take risk, and the ability to take risk. And sometimes they don’t match. And finding that balance is tough, but it can be done.
Number three would be, don’t let your biases get in the way. Again I talked about this a few weeks ago on the podcast about all these biases and when we have volatile markets, man they pop up, right? You’re going to revert to who you are and kind of your natural instincts. And for some of you it’s buy in the dip. I mean you know, I think the people that get the most attention are the ones that are scaredy-cats. But there are a lot of people that have been around the block and know that hey markets dip and when they dip, have I ever not been better off buying that dip?
I mean look, until recently the stock market was at an all-time high. Not a monthly high, not a yearly high, not a decade high. How about over a hundred year high. I mean all-time high. All time’s a long time. So we know buying the dip works. It just takes time. So some of you will have a bias to do that, and some of you will have a bias to sell in a sell off. Some of you will just revert to those. And so I think those biases get in the way. So really check those and be honest with yourself, so that when volatile times come, you can avoid that. And I think it’ll be really helpful.
Now we talked about starting with a plan. Number four would be stick to your plan, right? It does no good to have a plan, if you don’t stick to it. And here’s the key, going back to starting with a plan, you got a craft a plan that you can stick with. You know, if I know somebody needs, or can afford 100% stocks, because they’re not going to touch the money? It doesn’t do them any good, or me any good, if they abandon that plan, then panic out and sell. It wasn’t worth doing in the first place.
So if you come up with a plan, make sure it’s one you’re going to be able to stick with, and that’s where I really feel like doing some stress testing to show, here’s what to expect, right? They’re going to go with this type of portfolio. Let’s go back to ’08, how would it have done during that time? Or even in 2018. How would it have done during that time? And that way you go, “I can get through that.” Okay, now we’ve got something that you may be able to stick with. So stick with your plan, that’s number four.
Number five would be, quit looking at it so much! And this is hard, isn’t it? I mean, I’m telling you man, my phone goes off all the time and I’m an information junky, so part of it’s I kind of do it to myself. But don’t we all kind of do it to ourselves? I’ve got my Bloomberg machine, literally which is a very expensive piece of software, I can get it on my computer, or I can get it on my phone. So anytime there’s alerts, any of that stuff, anything happens to stocks, it’s popping up. So we’re being forced with a lot more information now than we used to, right? You’d be at work, you wouldn’t know that the Dow Jones fell until you got home that night maybe. Or even the next morning, until you read the paper. And now we know immediately.
And so it does mess with our emotions. So turn it off, quit looking at it so much. And I would especially tell you to turn it off during those volatile times. I mean if you know that your 41K, you’re buying in every couple of weeks with your pay check, like clockwork. In December quit watching it, quit watching your 41K. I got people watching their 41K in their 40’s, they’ve got 25 years to go before retirement. Who cares? Honestly, who cares? That sounds callous, but most of the money that you’re going to have when you retire in your 41K, hasn’t even been put in there yet. So you should be begging for the stock market to go down. So who cares about a five or even a ten percent drop. I mean honestly you should be optimistic about that. So if it bothers you though, just don’t look at it so much.
I mean look the market made a pretty big V from October 1st all the way to March 1st, right? There’s this big V. So had you not looked at it, you wouldn’t have known anything even happened and saved yourself a lot of stress.
Number six, have some conviction. When you come up with that plan and you’re sticking to it, have conviction. If you’re supposed to buy more stocks, because … Just to use something simple. If you’re supposed to be 50 – 50, and again we don’t really do it that way, it’s … The world’s more complicated than 50% stocks, 50% bonds, but just for podcast purposes. If you’re 50% stocks and 50% bonds, and it gets to 60 – 40, you need to sell the thing that’s 60. If it’s bonds, you need to sell those bonds and go use that money to buy stocks, to get the 40 back up to 50. Rebalance, you got to do it. So have conviction in what you’re doing.
Number seven, stick to your plan. Yes, I already mentioned that, it was number four, but it’s number seven as well. Stick to your plan. That’s so important. So important, I mean again if you look back, if you just stuck to it, it really, really helps. Really helps. Because often times, again, we’re going to make the biggest mistakes, when we don’t stick to our plan. Ah, I’ll just do this because I know better. I know we’re going into recession. I hear that all the time. I know the market is going to go down. You don’t know, I don’t know, but we do know the longer out we look at the market, the longer time frame here, and if we already came up with a good cohesive plan, we know it’ll work. If we stick to it. So number seven is, stick to your plan. Just like number four.
And the last one, number eight. Why’s there eight? Because I felt like it. Number eight is basically get help. If these things you can’t do them on your own, get help. And don’t get help from somebody that sells commissioned based insurance products. And don’t get help from somebody that has an ax to grind on TV, or a mutual fund company, who’s going to put you in their proprietary funds. You need independent help. We’ll be glad to do it. We’re an independent, registered investment advisor. You may not need us, but you may need us. Who knows, but we can … See we … The thing … When you get help, again if it’s not a family member or an insurance salesman at church, or anything like that, if you get somebody who truly is independent, they’re going to tell you just like a doctor, going tell you what you what you need. And you may not want to hear it, but they’re going to tell you what you need and do it in a proper fashion. Especially if they’re somebody that’s not getting compensated differently for the advice they give.
That’s a big problem. It’s been a big problem in this industry of financial services for decades, where people get compensated based on the advice they give you. So guess what? The advice you get, is going to be the stuff that pays them the most. That’s a problem. And it’s changing, fortunately. The fiduciary role which kind of petered out, but the wheels were in motion, where that’s … That is changing. And that’s been a good thing. So look for independent, registered investment advisor. That’s very, very important. But get help from somebody, because again left to our own devices you’re going to look through things through your own lens and it may be the wrong lens. You may need a different perspective and maybe it is a family member, but it’s got to be somebody who looks at things a little bit differently than you and can say, “Hey, you know what? This is really what you need to do. You need to quit looking at that 41K.”
So I hope those are helpful. Like I said there are eight of them. Couple of them are duplicates, for intentional purposes. But if you need any help, we’re always here to help. That’s what the podcast is for. And this is what we do at Eggerss Capital Management. If you need help give us a call. (210) 526-0057, or all you got to do is go to eggersscapital.com and there’s a big green button on the front page of the website. And it’s pretty simple. You go and click on that big green button, and essentially that button is, “I need some help.” Right? And we will help you. If you want to do that, make sure to go check that out.
All right, hope you have a wonderful weekend. Take care everybody.
This show is for entertainment only and information provided by the host guest and this station should not be deemed as advice. Your investment decision should be based on your own specific needs. You should do your own research before you make those decisions. As President and CEO of Eggerss Capital Management, Karl Eggerss may hold securities mentioned in the show for himself and his clients. Just don’t buy or sell anything based on what you get from radio or TV. Use your own judgment, or get yourself a trusted advisor.