The Worst Day to Invest – Episode 074

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[00:00] Welcome to the prosperity podcast fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street Here’s your host best-selling author Kim DH Butler and no BS money guy Todd Strobel Hey everybody, welcome to another edition of the prosperity podcast This is no BS money guy Todd Strobel along with my co-host and best-selling financial author who by the way Just keeps putting out more and more books Kim Butler. Welcome Kim. Thank you, Todd Happy to be here and I read some fabulous books over these holidays So we’ll talk about those maybe later in another podcast. But today I think we’ve got a fun discussion Super we are going to be discussing the worst possible day to invest and no

[00:50] It’s not a Monday a Tuesday a Friday Some people would guess that but the worst possible day to invest or to begin savings is when Kim Tomorrow and so why are we saying this? Why would there even be a worst possible day? And I think it’s because human nature always wants to put things off especially when those things are either slightly challenging to do like save money first before we spend it or when we’re Unsure of what we’re doing. I was just talking with a client today That was absolutely capable of saving a thousand dollars a month and it doesn’t matter where there’s a hundred a month or ten billion a month, but they never pulled the trigger because they were unsure of what their opportunities were or are and

[01:40] It’s so much easier to get excited about investing or saving and those two things are different When we’re sure of what we’re doing when we’re confident in what we’re doing So gaining that confidence the knowledge the education that needs to stand behind that confidence Is really where you should put your money first Super so we’re talking about the difference between Certainty and I don’t know if you want to use uncertainty, but what’s another good word? guesswork or lack of confidence or Just throwing the dartboard or what have you it I know we’ve got some fun work about how monkeys can actually pick better stocks than Advisors can sometimes and we’ll tackle some stock market predictions here in a little bit

[02:30] But let’s just pursue this out a little bit when you have certainty That’s a good word. And in fact, we’ve got a good friend that’s even written a column about the economic value of certainty When you have that it’s not only easier to make decisions It’s easier to take action So if the worst possible day to save or invest is tomorrow When do you think the best possible day is well, I’m gonna guess today. Yeah Absolutely. And so when we have spent some time getting educated when we have spent some time Possibly connecting with somebody that can help us be accountable Then we can take advantage of that Knowledge and that education and act today. So not only do we want to have the education we want to have the ability to act and

[03:22] sometimes yes that does require getting help and all human beings can Benefit from getting help and we all know this if you really want results in something Go to somebody that knows what they’re doing already and get that person’s help So the person who you turn to to be your accountability partner Does not always have to be the same as the person that you turn to to get the education But if they are then that’s a handy combination Super and so many times, you know a lot of investors particular will say, you know There’s so many more opportunities for somebody who has a hundred thousand versus maybe somebody who only has 5,000 or you know, they only have the ability to save like you said a thousand dollars a month

[04:09] But I can’t think of a single instance where I’ve met anybody who’s hundred thousand didn’t start at a thousand dollars a month somewhere Exactly, and it’s one of the things that I really am grateful for around the structure that we’ve used in our families lives for so many years and That’s you save first and saving is typically done on a monthly basis And if you save inside a life insurance policy, then that accountability buddy is there for you Automatically with the life insurance premium bill that you get either on a monthly or an annual basis So then your accountability is built in and what happens over time. In fact, I talked to a different client today She said, you know all of a sudden I have a hundred and fifty thousand dollars in this account

[04:57] And I just had been saving in fact, she was saving about a thousand a month I’ve just been saving my monthly amount and all of a sudden here It’s at this value and now I can go to other things with it So the ability to save and build up and then invest is so much more effective now Of course some people already have money in an IRA or some other thing that they built up with but I bet you’re right in most cases Unless somebody sold a business or had a bonus structure where they just happened to get a large lump sum Most lump-sum savings got there by being created month after month after month Super and then to go along with this if you happen to have that hundred thousand or you happen to have that

[05:44] 50,000 and again, we’ve been working with a client recently who’s in this situation to who actually has a million dollars But has let that million dollars sit in cash While they try to figure out where to invest it and boy when you start looking about how Not making a decision for several months when you’re making that decision on a million dollars and you have to factor in Inflation and then you have to factor in the Opportunity costs of not pulling the trigger on that and the gains that would compile on top of those gains The numbers can be significant can’t they? Absolutely and opportunity cost is something that we always want to be looking at and we typically look at it from a cost standpoint of if

[06:31] We do something other than something else like a versus B two different decisions but in this case we’re looking at opportunity cost if we do something versus if we don’t do anything and That opportunity cost does exist even within a day’s time frame Now, of course, it gets bigger and bigger as the time goes on but that’s why Education should occur up front. That’s why Look now for investment opportunities. Look now to learn what you need to learn about saving your money Even before you’re ready so that when you are ready the confidence is there and you can pull the trigger super and along with that Education and talking about opportunity cost Sometimes that education needs to be against the grain and not in where everybody else is going

[07:23] I know when we certainly look at the stock market this year And we’ve just experienced a massive 10% correction over the last couple days in it interesting You either have gains or corrections. Nobody ever loses money. I like that but You know if I were to ask you Kim, what do you think the market looks like for this year? Is it gonna go up or down? both ways Yeah, was that the right answer I guess the only thing I know for sure The other thing that I would ask you too is how much of your money is at risk in other words What’s the worst rate of return the market can give you? Now that’s a fun question. My answer is negative 100% and a lot of people think that the answer is zero when you say how low can the stock market go?

[08:14] Well, it can be a zero return No, it cannot it can be a negative 100% return people saw that in 2008 and 2009 where they literally lost entire account balances because of the drastic decrease in The stock market and what the value of those accounts were So we want to be very very careful that as we’re doing our learning We’re paying attention Where the education is coming from I’ve started to do this in every area of reading that I do so whether I’m reading about Gaining health. I will immediately look to the author who’s writing this information If I’m reading about finances who’s writing this information? Where’s this information coming from because it’s totally fine if it comes from a salesperson for example

[09:09] But what does that salesperson do with their own money? What does that health advisor do with their own eating habits or their own? workout methods or what-have-you and It’s so important that we pay attention where our education is coming from these days Because of course we all are turning to the web and we tend to look at the first two or three articles that are out on Google But just because they’re the first two or three articles on Google does not mean that they’re the best source For the information and I’ll readily admit I’m not a heavy researcher But I do know to pay attention where my education is coming from Super and again your definition of an investment is what? Our goal for investments are double digits

[09:56] No loss of principle and that second part is almost more valuable than the first part. Oh sure double digits Okay, that’s good, but the no loss of principles even more important in my mind And we’ve got just a couple minutes here and another concept just to think about is if you and this is a number I’m hoping you can come up with quickly is if you experience say a 10% or a 20% loss and Then experience that exact same thing a 10 or a 20% gain. You’re still behind aren’t you? Absolutely, you’re behind by about 50% actually So you typically have to double the loss in order to get back to where you were and it’s one Of the biggest mistakes people make with their money is to quote try to get back to where they were

[10:44] Because in doing that they’re going to go after investments that cause even greater loss of principle This whole idea of you have to take on more risk to get more reward is Actually a faulty premise because what it assumes is that by taking on more risk You’re going to get more reward and we know that’s not the case If you take on more risk, you also take on more risk you take on the opportunity of losing more money So yes, the higher reward potential is there but that also comes along with a higher potential for a loss And so risk should really be viewed as something to avoid You know people ask what risk tolerance is mine is zero. I don’t have tolerance for losing money. I earned my money I don’t want to lose it

[11:37] I think even people that inherited their money don’t want to lose it And so this idea that we should be knocking it out of the park or losing money is Ineffective and it’s why people have such a roller coaster ride with their finances if instead their goals are double-digit return Now this is investing not savings double-digit return. No loss of principle, then they’re never sliding backwards consequently They’re never trying to make that up Super and again just to clarify it’s a double gain to make up the to make up the law So if you have a 10% loss, you need to have a 20% gain. You said lost twice. So it’s sorry So just to clarify that thank you. Yes good clarity and and that’s just round numbers

[12:21] But it helps us realize how tough it is to do Super and it’s not hard to have that. Like I said, we saw a 10% loss, you know Just in a day last week So right, you know our advice that we have come to over time by being both involved in the market and involved in Alternative investing is not to play in the market and to go where we have better control over the rules Anything you want to add before we wrap up? Well, just keep your learning. It’s something that we should be doing our whole lives long and I’m learning every day I’ve learned from the questions that clients ask I learned by rereading materials that I thought I knew everything about I’ll pick something up on and When your minds open and you continue to learn then you continue to grow and that’s really what we want our money to do

[13:09] Is to continue to learn and continue to grow if our minds are doing that then our money will be doing that as well Super we invite everybody to visit partners the number for prosperity comm a lot of good learning materials there And again, this is no BS money guy Todd Strobel for the prosperity podcast Once again, thanks Kim Butler and take care of everybody Thank you for listening to the prosperity podcast to take control of your money and have it work for you Visit us at partners for prosperity comm if you liked this episode, make sure you subscribe and leave a review