96 – Investing in Times of Uncertainty

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Episode Overview:

How should we approach investing during these uncertain times? Ken gives us the short and resounding answer. Whatever your strategy is…keep doing it! This is where your strategy and planning is put to the test. Especially if you subscribe to the “index buy and hold” strategy. Don’t carefully craft your ship, just to abandon it at first sight of a storm cloud. Keep moving forward with your strategy – devoid of emotional decisions. Ken breaks down the logic behind this sound advice.

Transcriptions are auto-generated, please excuse grammar/spelling!

Happy day to you. This is Ken Kaufman. And I am thrilled you’re here for episode number 96, “Investing During Uncertain Times.” We certainly have uncertain times that we live in right now, we’ve lived through it for about the last year. And there are lots of times that were uncertain before that and there are going to be many times that are uncertain looking ahead. And I think I have just one strategy for you here, one tip for you to take away and I’ll go ahead and give it to you right now, explain it a little bit, and then we’ll wrap up.

Here is my advice for how to invest during times of uncertainty. Whatever your strategy is, keep doing it. Don’t change. Don’t listen to the news and decide you need to change this strategy or change the way you do this or do that. Now this advice is based on, you’ve really thought through what your long-term investing plan is, you have vetted out your investment choices, or you’ve had a professional help you with that, or an advisor of some sort. You’ve developed to some degree an investment policy statement that makes clear what it is you’re gonna invest in and how that may or may not change over time based on what your asset allocation strategies are.

Times of uncertainty are where you are tested to see if not just if you really believe in what you’re doing, but you’re willing to stick with the strategy, especially for those that have decided I’m not gonna be a market timer, I’m going to buy indexes, I’m going to be a passive investor, I’m going to sit back and not keep changing my mind, I’m gonna buy and hold. And the only part of the buy and hold that would change is if you’re choosing to change your asset allocation in your investment policy statement and in your overall strategy if you’re doing it over time to give yourself access to less riskier assets over time, more of those in your portfolio than less as you’re getting older toward retirement, or you’re getting closer to the time when you would need the money for whatever it is you’re investing for.

The way to invest in times of uncertainty is to stick with your game plan and run with it. There’s a reason why you developed it, it was based on sound logic and who knows if you’re going to be more right than if you make a change? For example, I just read a whole set of commentary on real estate investment trusts, and should you be invested in them? Now in my retirement portfolio, I am invested in real estate investment trusts. There are people saying, “I’m so glad I dumped those last year because this has been a bad year for REITs and for the market overall just from commercial real estate standpoint.” True. That was an interesting marketing timing play.

The thing is, if you decided that should be part of your strategy and your buy and hold, you want to stick with that strategy, you don’t move away from it because there’s a period of time when REITs for the top-performing asset class and they’re going to probably come back at some point in time. I don’t know when, I don’t know the timing. But if you decided a long time ago, or maybe just recently when you built up what your portfolio was gonna be and what this investment policy was gonna be, if you decided to put them in, run with it. The biggest and most expensive element of being an investor is chasing returns that have already panned out and chasing in essence what looks really amazing and really exciting because it’s done so well, that may mean that its run as almost over, maybe it’ll keep it going. But the whole reason for this episode of this podcast today is the way that you invest in uncertain times is to keep moving forward with your strategy. What’s happening in the market should not phase you. If the market goes down, be thrilled because that means wherever your dollar cost averaging, you’re buying cheaper. If you are rebalancing, be thrilled because it means that you’re buying cheaper. If the market is going way up, you get this amazing amount of confidence and things are going so great. But maybe you should be a little frustrated because if you don’t need the money in for 20 years or 30 years, it means all the money you’re gonna be investing in there at those higher prices from here moving forward if the market doesn’t slip back to where it is, or, you know, even less than where it is today.

There’s so much emotion in investing and in making investing choices. The way you succeed in uncertain times is you strip the emotion out and you defer to what your plan or what your strategy is, and you keep pushing that plan forward, you keep executing on that plan. And research shows over and over that when you let the emotions dictate the day and when you try to time the market it generally does not end up panning out well, especially for those of us that choose to play more on the passive side and use index investing and very clear asset allocation strategies for how we try to grow our net worth.

So that’s it. Very, very simple. How do we invest in uncertain times? Keep rolling forward with your plan. Do not allow uncertain times to change your opinion about your investment policy statement. Run with it, execute on it. And nobody knows what’s gonna go up and what’s going to go down over time. But what I can tell you is I believe in human beings, I believe in innovation, I believe in creativity, and I believe that regardless of how bad something might get or times might get, or how good they might get, I believe that human beings are going to continue to develop, to grow, to drive innovation, which is going to add value, and until the day that for some reason I think that’s gonna go away and I don’t think it’ll ever go away. But so much as I believe in that the underlying humans of this world that are going to be looking to grow and add value and innovate and create, I think there’s gonna be value and the strategy for investing to say, well, I think, you know, things are just horrible right now, nobody should be invested in the market, that’s an interesting strategy, it’s an interesting thought process. I can tell you for decades and decades, people have taken that strategy and have been frustrated because they got out of markets a long time ago and they’ve just gone up and to the right. Now it’s not a straight linear line, there’ve been massive downs, massive ups, lots of periods where it was flat and where there’s high inflation, low inflation.

So I’m not saying that it was simple and it’s definitely…I’m putting in the lens of hindsight on to be able to say, “Hey, look, everything worked out.” But I think the underlying asset that we ultimately are investing in when we invest in stocks and companies and bonds and in government, and all of these things is that human innovation is going to continue to win the day and it’s going to continue to create value. And even if that’s not valued at where you think it should be today, or in 10 years or 20 years, ultimately the value will be generated and created. And I think that’s where the opportunity is, your investment policy statement was created based on that probably is an underlying assumption. And the only way to invest in uncertain times is the same way to invest in more certain times, as well as probably just accept the fact that even when it feels like certain times, they’re still relatively uncertain. And we stick with our plan, we stick with our strategy, and we execute. Many, many thanks to you for joining today. This is a wrap for episode 96. Happy day.

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Join Chief Financial Officer Ken Kaufman as he helps you track and hack your net worth. For those seeking financial independence, your net worth is one of the most significant measurements of success. Using his two decades of financial experience, Ken Kaufman helps you overcome your financial obstacles and look onward towards a better, brighter financial future.

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