Stocks Lead, Don't Follow | Series 2.5

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Welcome to the Enjoy More 30s: Family Finance

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podcast, the only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out and distract our focus

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from simply enjoying life.

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Welcome to the Enjoy More 30s: Family Finance

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podcast. Today we have the fifth episode in our "Your Money

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Multiplier" series, which is entitled "Stocks Lead, Don't

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Follow". And this is one that is definitely keen to anxiety that

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may come out from when you see the stock market, you know, go

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down, you see your accounts go down and that natural fear that

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kind of comes out of that. So today, we're going to cover what

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you need to know when it comes to what typically makes the

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stock market react. And then more importantly, the mistakes

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that most investors make off of that. And so where that will

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lead you to then is what you can do, so don't do those things, so

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what you can do to avoid being one of those investors.

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When I was a kid, I remember looking up a lot to my older

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cousins. My mom's side of the family was very large, and they

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would teach us a lot of you know, interesting things let's

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say. Some of these were really great, and others maybe not so

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much. So for example, if you break the glass in your mom's

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fancy shelf clock, just take the glass out and throw it away. Now

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it just looks like the glass is really, really clean. And you

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don't get in trouble. I think it took my mom 10 or 15 years to

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figure out that that glass had been broken. So that was, you

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know, excellent advice. Saran wrap on the toilet as a prank,

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that was a horrible mistake. So well, well deserved punishment

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off of that one following my cousin's advice. So thank you

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very much for that.

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What you need to know when it comes to stocks is that they can

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kind of be much the same way, especially during emotional

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times. There are a lot of saran wrap ideas out there, that can

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get you into a lot of trouble. The stock market is what they

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call a leading indicator. Basically, what that means is

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that it acts in advance of what people think is going to happen.

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So if Apple earned say $100 billion in revenue, instead of

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the expected $110 billion, the stock price subsequently goes

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down. The company still made money, but the stock price was

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already higher, as it was predicting or expecting that

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$110 billion number, not the $100 billion number. As you

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could probably guess then, when they feel like they had no idea

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of what's going to happen next, extreme uncertainty, the market

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tends to drop dramatically.

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The most recent two events that we have that you might remember,

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one is the 2008 mortgage crisis, and in 2020 here, we had COVID.

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There was very little clarity at the time when these things were

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going on of what was going to happen next. And that

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uncertainty is what drove all that volatility. Once more

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clarity returned, who was getting bailed out, vaccine

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timelines, what you have, you know, for each situation, what

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the clarifying item is, that's when it started to reverse

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course.

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So what you can do is really the hardest thing, it's very easy to

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say, but it's really hard to implement. And that is not touch

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it. You are reacting off of past information. "Hey, everything

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just went down", or, "Hey, it all just went up." If you react

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after hearing this, then you most times are trying to catch

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the wave that's already past you on the way towards the shore. If

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you're maintaining a well diversified account, and you can

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listen to episode six from the first season, "Investment Should

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Be Boring", if you need that refresher, then you are

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positioned where you should be long term. If you have an

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advisor using a diversified managed account model like we do

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for our clients, they're likely rebalancing as well through

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these times to potentially take advantage of the ups and downs

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along the way. What's rebalancing? Rebalancing is

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basically taking a little bit out of the pieces that have done

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really well and putting them into the things that are a

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little bit below where they're supposed to be. So again, it's

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kind of a, you know, take some from the high or, you know,

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selling something that's high and buying into something that

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might be a little bit low right now. So if we accept that things

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are going to move ahead of time, that leading indicator, before

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we'll have a chance to generally react, then we can potentially

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avoid some of these big mistakes that most investors make by

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pulling out when things are already low, and generally not

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adding money back in until things have significantly

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rebounded. If you're waiting for, "Oh, I'll put my money back

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in after I already see it going up", you're already missing the

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up. So leaving them alone is usually the best advice that you

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can give somebody in these situations, and too many people

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end up with much less than they ought to have, if they had just

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not touched it throughout the ride.

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So a recap for today. First, understand that the stock market

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is a leading indicator. And that uncertainty is what often drives

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the vast majority of the volatile times. Less uncertainty

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usually means less volatility. Secondly, once you see the

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market went down, or you see it already went up, you are

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generally already too late to act. When there are a lot of

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waves, don't try jumping on a different boat basically. If you

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touch your investments and miss time when you take money out or

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go back in, you could very well wind up with significantly less

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than if you were just patient and did not touch it at all. If

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you never pull your money, you know, out during these volatile

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times, then you can't miss the up, you know, whenever it may

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come back. So this is one of the things that seems very basic,

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seems very easy, but it's in the moment, again, you're going to

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be very emotional- expect that to happen. COVID won't be the

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last one, the mortgage crisis wasn't the last one, there will

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be more emotional times that you're going to have to deal

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with this ride. And the worst thing that can happen is if you

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get, you know, really emotionally damaged, so to

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speak, you know, people that lose a lot in these times, they

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may be afraid to ever do, you know, invest again. And now

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we're not going to be able to reach all those goals that we

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want to set almost certainly long term.

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As always, thanks for tuning in today. I hope that you can take

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some of this information that we're providing and be able to

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use this and implement it on your own. If you're not wanting

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to implement these things on your own, please please please

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reach out to somebody that can help. Check out our website at

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enjoy more 30s .com, that's enjoy more three zero s .com. We

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have an 'ask Joe' section and we'll have more resources to

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come as well. So reach out and we'd be happy to help any way

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that we can. If you enjoyed this episode, as we always say,

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please make sure to follow us and review us on Apple podcasts

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or wherever you listen. There are literally millions of young

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American families out there I'm trying to reach and help just

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like you. The next episode is titled, "The 7 Year Task: Legal

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Docs" where we will cover one of the most important things you

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can possibly do for your family's protection. And yet, it

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is often one of the things that we see most young families

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ignore for the longest period of time. Thanks very much as

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always, and I look forward to connecting with you again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first, Joseph affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS securities Inc and TFS advisory services an SEC

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registered investment advisor member FINRA/SIPC.