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Welcome to the Millennial Money Moves Podcast. On today’s episode, we’re talking about the recent stock market volatility.
It’s times like these that really test our emotions as an investor, and a lot of mistakes are made that can really derail your financial future. But within every down market, there’s also opportunities for us as investors to take as well.
So we’re gonna highlight some of those. We hope you enjoy this episode. This content is purely educational and does not intend to be financial advice or financial planning.
Please consult your professional financial advisor or tax professional to receive tailored advice to your personal situation. Babin Wealth Management is not responsible for action taken by listeners based on educational content provided.
If you would like to receive personal financial advice, please reach out to Babin Wealth Management directly at babinwealth.com. Let’s make moves. Welcome everybody to another episode of the Millennial Money Moves podcast.
I’m your host, Sean Babin, with me as always in the co-captain seat, Blake Bandani.
The one and only, babe. Good to see you, Sean.
Well, we’re kind of having like an emergency podcast. You know, we talked about this month that we were going to be working with business owners and kind of getting their insights into how to run a business more efficiently on the finance side.
But in the last week, the market has the market. When I say the market in this podcast, I’m talking about the stock market. The stock market has been an absolute bloodbath.
So Blake and I wanted to get together and talk to you all about, you know, what to do during a market crash, you know, how to weather it, some historical numbers for you. I’m going to share some stuff on my end.
So if you’re watching through the video, we’re going to have some cool graphics for you guys to kind of point stuff out. We’ll do our best to articulate it for the, just the listeners so you can kind of gather what we’re talking about here.
And then, you know, some money moves, man. There’s moves to be made in a downturn.
If you can keep your head on a swivel, your emotions in check, there are some epic moves you can make that will greatly set you up for your, you know, better in kind of in the future. And your portfolio will greatly thank you.
Your future self will greatly thank you.
Sean, did I hear you right? We’re going to have some graphics.
We’re going to have some graphics. So I figured out how to share my screen. So we’ll have some graphics.
We’re evolving, man.
Look at us.
Yeah, dude, this is kind of fun. I like the video dynamic of it, actually.
I do too. But I got to tell you, Sean, I don’t think it’s, I should say, this emergency podcast is much needed because in my personal point of view, I don’t think I’ve seen a market this crazy in 72 hours.
Dude, I’m with you. I mean, COVID was pretty insane. From top to bottom, you’re down about 40, 40, 35%, depending on what you’re looking for.
And that happened in about a 45-day period. So that happened wildly fast. And in the last few days, so we’re coming to you on April 9th.
That’s when we’re recording this podcast. And so the stock market actually today had one of the best days it’s ever had in history.
So we’ll address that in a minute, but let’s talk about kind of what’s just proceeded the following Thursday, Friday, Monday, Tuesday. And yeah, basically, they were, everyone was comparing to what just happened to COVID.
You know, 5% losses in a day. That is wild.
Well, and I was thinking too, I think the key difference between the COVID era and these last, I don’t know, three, four, five days, we’ve kind of just got used to the COVID market. We’re like, hey, it makes sense. We’re on lockdown.
Businesses can’t open up. Everyone’s panicking. The world’s coming to an end.
Just ride it out, right? It’s, there’s got to be a light at the end of the tunnel, but we just got so accustomed to just a down market every day. For us to see the market today on April 9th, I couldn’t believe it.
I almost had to refresh the app to make sure I saw it correctly, because I did not think it was going to have that quick of a bounce back.
Yeah. And that was the crazy thing. When it’s self-inflicted like this, where it’s very political, it’s very much…
I don’t want to get political, but it’s very much in one person’s control, the policies are right. It’s not like a COVID pandemic where people can rationalize, okay, the world is getting in a crazy spot.
Like this one was like, okay, why are we doing this? Everything was fine. Why do we need to rock the boat?
And the volatility that came with that, just the uncertainty. So again, we hinted about this before in the stock market. Is it absolutely hates uncertainty.
So when we’ve got the president talking about raising tariffs to the tune of 50, 60% on certain countries, that is just the ultimate trade war sign.
And when you have trade wars, prices go up, inflation goes up, life gets more expensive, people spend less, stay home. You inevitably are just putting your country into a recession.
And so that’s what the stock market priced in really, really fast in three days. And it was down about 20 to 25% from its highs on February 18th to pretty much Monday of this week. So February or April 7th.
So again, February 18th to April 7th, down about 20 to 25%. And a lot of that was in three days. My client’s accounts were positive for the year one week ago, a week ago from today.
Insane.
And now they’re down 12 to 10% depending on kind of the model or how aggressive they were.
And I hate to do a spoiler alert, but if you had listened to our podcast when we discussed the initial discussions around tariffs, you know I like to give you your flower, Sean.
I think you nailed it, right? About the uncertainty, just the concept of like, if we do impose these tariffs, there is going to be some disruptions. So buckle your seatbelt.
So hats off to you, Sean. That was a great episode and you saw the future. I don’t know if you time traveled on us, but…
Yeah, I think you kind of know potentially what could happen.
Not like the stock market selling off, just like what tariffs mechanically should do and can do. But yeah, man, like it is a wild ride when you’re losing 5% on your investments accounts on a Thursday.
Then again, it’s 5% on Friday, then another 5% on Monday, and then like 2 or 3% the following Tuesday. Like sometimes it’s nice. I like that because it happens so fast for clients that you can’t even think about it.
And they’re just down in there. It’s like, well, what do we do now? And that’s kind of what I wanted to address on this emergency podcast.
We’ll remove today. We’ll talk about bounces and markets coming back. But let’s just talk about when the market is down that big and you’ve got kind of an unsettling feeling about your investments, the future, is it going to go lower?
The easiest thing for people to do is just sell out of their investments and kind of run away and head for the hills. You know, we as humans don’t like pain and losing money is painful. You don’t really invest to lose.
And so when you’re losing, the easiest thing to do is sell and kind of go to cash and then just like, hey, we’ll look at this three months, six months from now and see what’s happening.
And that is one of the biggest mistakes that I see time and time again from the average investor, especially the do-it-yourself investor, is they think they know what’s coming next because they have the ability to push a button on their computer and
control it. And so they sell out, go to cash, and then they get back in later when the market’s higher.
And so they’ve just done what we alluded to as well in the prior episodes is they’ve now sold low and they’ll buy higher and they’ve just basically locked in their losses.
Which is what investing one-on-one don’t do that.
Yeah, you buy low, sell high.
But I guess it’s easier said than done, right? Even myself, I’m not the most knowledgeable from an investment perspective. Obviously, the industry I’m in, I come across it, so I have to know it.
But I don’t blame a lot of people to have the panic mode set in and say, well, if I can weather the storm, sell low now, but then get some guarantees with some type of cash account or money market, why wouldn’t I do that, Sean?
But then today showed you why you shouldn’t do that, right?
Yeah, you have to kind of remember what you’re investing for and what your time horizon is.
Bingo.
Because we’ll show you there’s many, many bumps and bruises along the way, whether it’s geopolitical, you know, world wars, there’s been trade terrorists before, there’s been oil crisis, there’s been the financial crisis.
There’s always some kind of crisis that seems to happen probably every four to five years.
And in those moments, it’s knowing how to weather them and knowing what you’re invested for and knowing that eventually this too shall pass, and your accounts will get back to where they were. I think it’s like you said, it’s just tough though.
It’s tough, stomaching your money being down. And now in a world where the media is everywhere, we look at it all the time.
You’re probably getting memes to death on your phone or Instagram, Twitter of just bloodbath on the street or street as in Wall Street. And it also just those things just fuel your emotions.
It makes you be like, you can watch one real clip about somebody talking on CNBC, how the market’s going to just crash and never come back. And you will be like, oh my God, that guy probably knows more than me.
And so you get fired up to do just that. I don’t want to lose anymore. And you make kind of, you push yourself in an emotional state to make some kind of mistake.
Percent.
But I don’t know, I always think back to, and it’s kind of the average norm of anything related to financial industry or investments is everyone has a different perspective or a different scenario. Right.
But I would say that, and we’ve already mentioned this, we’re targeting millennials, right? People in our age group. And then when I think about the 401k perspective, you’re never chasing short term gains in a 401k plan.
That is not the concept of a 401k.
So for those listening that maybe made some trades in their 401k to get a little bit conservative, and you’re in your 30s or early 40s, regardless of maybe why you made that decision, you really shouldn’t be worried about the 4k account balance until
Yeah.
Yeah. And like when you’re in a 401k, you’re like systematically buying in every two weeks. And so if something goes down 20%, 25%, next paycheck, that money’s going in at a lower price.
And you just, like you said, don’t touch it. Just let it happen.
Right.
Now, this is a line I’ve been using the last week with my clients is the stock market is the only thing that people hate when it’s on sale.
That’s nice. I like that.
It’s 20% off, 25% off. And everyone wants to just flee for the exit versus, hey man, if a car or house was 20, 25% off, I’m liking that a little bit more than I did, you know, the week before.
Yeah. Or wherever you shop for clothes, you name it. If they’re like, hey, we have a 50% sale.
You’re going into that store and you’re going hard.
But isn’t that funny though? Like it’s just a mindset.
It’s a great concept. Yeah.
It’s a weird mindset because it’s our money. Like again, you don’t invest to lose. So when you are losing, it’s hard to shift your mind to be like, ooh, opportunity mode.
Like this is a positive. My accounts are worth, you know, 75% of what they were a week ago, but let’s look at this as a positive. Like that’s tough.
I get it. And that’s why it’s super helpful to work with a financial professional, whether a financial advisor, a financial coach, whoever can be a good sounding board for you, like a true professional in this industry, because we’ve seen it before.
I’ve seen it. COVID was a big one. 2022 was a down year.
I mean, I wasn’t doing this in 08, but I was in college, and I remember, like, obviously, what the world turned into after that and what the stock market did.
But there’s always going to be these kind of moments, like I said, probably every four to five years, where the market just has to kind of re-correct itself.
And for listeners in our generation, I mean, like we said, I mean, COVID was already, what, five years ago. They come around, but it’s not like it happens every single year.
So, like, every five years, I mean, before you know it, you missed three or four cycles, and that’s huge. That’s a huge miss if you didn’t take advantage of it. So it’s just a reminder that we’re not saying it’s guaranteed.
There’s nothing guaranteed about the stock market. But what is guaranteed is if you have a long horizon for having to touch in on this cash, there’s a good chance that that’s going to go back up at some point.
So you’re allowed two investing mistakes in your life.
Let’s hear it.
Actually, let’s say that another way. If you make two investing mistakes in your life, that is the difference between you retiring probably when you want to versus working the rest of your life. And it’s these moments that people make mistakes.
Like I said, the biggest one is they basically just sell out. And then the second biggest one is they just stay in cash for way too long. They don’t get back in.
Right.
And so you do that twice in your life.
Because here’s what happens, is they sell out at a bottom, then they buy in higher, and then it goes down again, and then they sell out. So they continually are cutting their money by 20%, 20%. And then they just say, you know what?
I’ve had enough of this. I’m not investing anymore. It doesn’t work for me.
It’s too risky. And it’s because they’re just doing, they’re doing backwards what they should be doing. And they’re not letting the market work for them.
Yeah, so you can, two mistakes, you investing mistakes in your life, like I said, could be the absolute difference between you retiring when you want to versus potentially working the rest of your life.
That’s powerful, right? But it’s true. I will say one of my favorite lines I’ve heard, I don’t know when I heard it, but only lose when you sell.
Yeah.
Right?
Yes.
Yeah.
And that’s the concept of like, you can’t win if you don’t play kind of thing, which I guess does kind of allude to that. And you know, if you have a gambling problem, there’s plenty of hotlines, but it’s true, right?
The only time you actually see a loss is when you panic and sell, because now you’re trying to put cash at that value, which is bottom down.
Exactly. You know, again, this is historical, but I hope it continues. The stock market has never, and I repeat, never not come back.
So fair to say it’s almost a guarantee, Charles Barkley voice, that you’re going to be okay.
No guarantees.
We can’t make no guarantees.
No, but it’s a Charles Barkley guarantee, which is not correct.
Okay, gotcha. Yeah, yeah.
So, but then on the flip too, like for those that may be listening and are actually approaching retirement or are actually kind of concerned, I feel for them.
But I also think that if you’re in your retirement era, your retirement age, and you’re still 100% invested in stocks, I think it’s time to talk to an advisor because you should be mitigating that downside risk as you approach retirement because
Absolutely.
We’re going to talk about asset allocation a little bit.
Asset allocation. Dollar in the jar.
Basically, know your risk tolerance, know your thrill level, like what you should be invested in. And yeah, it is troubling when you’re getting closer to retirement, in retirement, and this happens.
But I think the worst recovery that’s ever been is wait for nine. And that, you know, from the top in 07 to getting all your money back probably took five years.
And so that’s what I have to continually tell clients over and over again, is like, you do have five years, even if you’re 65, like you have five years. If you’re 85, a little different.
But yes, we shouldn’t have all your money in the stock market either.
Exactly right.
There we go. All right, I’m going to share a couple of things. Let me know if this is interesting to you.
I like kind of looking at numbers and trying to make sense of it. So what I’m pulling up here is data going back to 1979 through 2023. And this is intra-year largest gains, largest declines.
And then if you don’t mind, maybe zoom in a tad.
Yep, I’m on it.
The circles are where the market finished.
Perfect.
In that year. So basically what I love about this graph is it shows that every single year at some point the market was down. That’s that kind of brownish line below that x-axis.
But this is a 45-year period, and in 37 of the 45 years, the stock market finished positive.
Pause there.
Yeah.
Powerful.
37 of 45 years.
Insane.
Going back to 1979.
I mean, when you do meetings, you must just have this up or have this in front of the clients before you even start a conversation is what I’m guessing.
It’s just helpful in times like this to be like, look, even in COVID, there’s COVID 2020.
You can see how far it went down a little like 25-ish percent, and then you can see how much it went up because that reversal happened and then where it finished the year.
So basically, what I love about this is it tries to show clients is, hey, yes, this has happened before, a sell-off has happened before. Your accounts being down 10, 12, 15 percent, I feel like that almost happens multiple times in a decade.
Absolutely.
We’re looking at probably six to seven times in the last decade alone. But like I said, that doesn’t mean you’ve lost. You only lose when you sell.
So you can see how many times it’s been down, it finishes the year positive. So I thought this was a great graphic just to go back through time, show people that yes, the market goes down and sometimes big. Look at there, oh wait, almost 50%.
2001, 2002 with the tech crash, around 30s, back to back years. And then just as it gets really, really bad, the biggest corrections always follow the worst years. So this is where I talk about it.
If you sell out at the bottom of 2002.
No, right there, the biggest corrections always follow the worst years, right? Let that sink in. Yeah, that’s where we are.
It’s like, of good visual, it’s like a rubber band.
The farther you pull this down, meaning the farther your accounts go down, or the stock market goes down, the more, like, the more ump that’s gonna come back with, like the harder it’s gonna come back.
And that’s kind of how I use that analogy with people. Like, look, going down sucks, it sucks, it sucks, but the further it goes down, the more attractive it starts looking, and then people come rushing back to it, and kind of push it back up.
And I think just talking this through, Sean, I think one of the biggest issues we have as consumers is, especially nowadays, in this day and age, is we want results and we want them tomorrow. We want them yesterday, right?
But that doesn’t, you gotta get out of that mindset when you’re talking investments, is that fair to say?
Yeah, absolutely. This isn’t like an overnight success thing.
Right.
It’s decades and decades strung together to, again, if done correctly, you should be doubling your money every decade. It’s not doubling your money every year.
Right.
So it’s continually investing, not doing something that you’ll regret, like running away from it or picking the wrong stocks or just putting all your money in one stock, kind of making those classic investing mistakes that if done right, it should be
doubling your money every decade. That’s what it’s given us. That’s what it should continue to do. That’s the hope.
Absolutely.
So the next huge point, like we’ve alluded to already, is just staying in your seat, staying investing, not letting your emotions get the best of you, or not trying to time bottom to top.
When you sell out of the market, whether it’s going down or up, you have to be right twice. So you have to know when to get out, and then you got to know when to get back in. And that’s a very, very difficult thing to do.
So let’s just take a look at staying invested throughout the last couple of decades. It’s going back to 1990 through 2023. And if you just put $1,000 in the S&P 500, what it would have turned into.
And this data set, what I love about it, is it shows you the power of missing the best days of the stock market. Remember what I just said, that typically the best days or best years are followed quickly by the worst ones.
And we literally just saw that today. We had a huge market sell-off that we hadn’t seen since COVID. And then today was the best day for the Dow since 2009, and the best day for tech stocks since 2001.
So if you sold out yesterday, you just missed the best day in over 20 years in some areas of the market. So this graph highlights if you had stayed invested the whole time versus missing the best day, the best five days, the best 15 days.
And so $1,000 invested in the S&P 500 in 1990 would have grown to $27,000 by the end of 2023. If you had missed the single best day, just one day out of this whole 33 year time period, your investment gets eroded by almost $3,000. It goes to $24,000.
In one day?
Just missing the best day.
If you had missed the five best single days, your $1,000 investment would have only grown to $17,000. $1,000 difference on $1,000 investment? That’s crazy to me, man.
You missed the five best days. You’ve just made such a different swing in the portfolio value or your net worth value.
But then look at, as you go down, obviously I don’t want to jump ahead, but even if you missed out on the 25 best single days of the market, you still outperformed T-bills, which sell you on the peace of mind.
I don’t want to say guarantees, but the interest rate returns, you still doubled what that would have done for you.
So if you panicked and sold and said, well, I want to be conservative, I need some peace of mind, and you missed out on 25 single best days of the market, you would have only made half of what you could have.
Yeah, and investing in pretty much cash, like just putting money in your savings account, or high your savings account, yeah. Exactly.
Insane.
I love that number there, because it shows you just how detrimental cash could be to you over a 33-year period. Your $1,000 grows for the listeners out there.
$1,000 invested in pretty much cash over 33 years would have grown to $2,300 versus in the S&P 500, 27,200. So extremely powerful. That’s a $25,000 difference off of $1,000.
But I still think from a consumer perspective, this all sounds great, Sean, but it’s still nerve-wracking to do it, right?
To just ride the roller coaster.
Yeah, man, it is tough. Again, it’s just purely emotional driven. You do it for a reason, and then when that reason is to make money and you’re losing money, there goes that reason.
And great segue into one of the last visuals is this is the growth of a dollar in the MSCI world, which means, so these are just different indexes, like the S&P 500, the largest 500 companies in the US. That’s an index.
The MSCI world index is a combination of US stocks and international stocks. And I think that’s a huge important thing for investors is to have a split between both. Now, is it an even split?
We can debate on that at some point. But this is just an index showing a mix between US stocks and international stocks and how it’s behaved since 1970 through 2023.
So again, the whole point here is it’s highlighting all kinds of different world events.
We’ve got COVID-19, we’ve got the euro debt crisis, we’ve got the financial crisis, we’ve got the 9-11 terrorist attacks, the.com crash, Black Monday, you know, oil embargoes in the 80s.
And all you see is what Blake has talked about before, that 45-degree angle of the growth of stocks throughout the world too, which I think is an important highlight.
Up and to the right, it’s weathered those storms, it’s continued to come back, it’s continued to go higher. So yeah, in these moments where it’s fearful and you’re thinking, this is the doomsday scenario, like the 08 is just around the corner.
I get that and it’s tough to stomach, but this is where I go to refresh my mental and my client’s mental of like, look, even if that does happen, it’s come back and it should again.
I think everyone when they invest, it gets terrified that it’s all going to go to zero. If it does go to zero, guns and ammo ready, and you don’t worry about your gold either because I don’t think that’s going to do much for you.
Go get some water supply.
It’ll be guns and ammo and water. Yeah, it’ll be a very apocalyptic kind of scenario there.
And I’ve always said that, Sean, right? If the S&P 500, if it fails, we have bigger fish to fry than our retirement accounts because something’s going wrong with the world.
Yeah, you’re not going to care that your K went from like 200,000 to 80 bucks. You’re going to be in your car searching for family and like, I don’t know. Totally.
You won’t be worrying about how much money you can pull out of your K at that juncture. All right, last little slide I got here for us.
No, no, go ahead. I thought you had said that was the last visual, so here we go.
Oh, did I?
You might have said one of the last visuals. You said you might have said one of the last.
This slide is back to your point about knowing what you’re invested in and understanding the variability of stocks versus bonds and setting expectations of volatility of returns. So on the bottom here, it shows different what I call asset allocation.
So asset allocation for us is how much stocks to bonds that you own. And so this goes from the left to the right, we’ve got 100% stock to 100% bond.
And then the largest annual return is to the up, and the smallest annual return or worst annualized return to the bottom. So you can see for 100% stocks, the best annual return that this sample asset allocation has had is 38% to the positive side.
And the worst it’s had is negative 40. And Blake, can you guess, just this is what I do to my clients, any guesses on what year the negative 40 was and the positive 38 was?
I mean, the negative 40 had to be COVID, no?
No.
So 08 then had to be. And then the positive 40, I mean, I don’t want to be a spoiler, but was it a year after 08?
Yeah, you got it. You’re picking up on the trends, exactly. So it’s the worst year, wait, and then the best year, 09.
And it makes the graph for each one of these. It’s literally the very next year. So basically what I’m trying to show here, or the listeners either, what I’m trying to articulate, is understand the potential upside and downside of your portfolio.
It’s all great when everything is great. But if you look back through history, did you know that your 100% stock portfolio could potentially be down 40%?
I mean, if we’re just looking at history and the worst it’s ever done, or did you know that a 60-40, so 60% stock, 40% bonds, worst it’s ever been down is 24%. Did you know that’s a possibility, Mr. and Mrs.
Clinton? I think we all look on the top side of that x-axis. We know how much has it averaged, what’s the greatest it’s done, and we neglect to look at the potential downside volatility.
And so when I’m talking to a client and they’re 100% invested in stocks, and in the last three days, they’ve lost 10 to 15%. And I get to show them this graph, I go, this is right in line with what could potentially happen.
Like we all got used to making 12 and 15 and 16%. And that’s again, why we do it. But remember, it’s that three steps forward mantra, one step backwards.
And for our millennials out there, the greatest asset you have is time, right?
Like even in down markets, you are still going to most likely work, you’re still going to have time to recover, versus maybe you are closer to retirement or in your 60s, 70s.
But then at that point, to this graph, maybe you can’t go all out on stocks, but you still can have a strong asset allocation to keep up with where you are with your age.
But for the millennials specifically that are listening, even if the market stays down, we’re still going to be working for another 10, 15, 20 years. So you’re still going to be earning income.
But I do feel for maybe those that are closer to retirement, and have a higher balance of retirement nest egg, whether it’s 401k outside accounts, to where like a 40% on a million or five million hits a lot harder than on 200,000, right?
Yeah, and if you’re in retirement and you’re 100% allocated to stocks, come talk to me. But again, that is very dependent on how much is that of your net worth? Have you done a good job savings?
Like if you have and you’re in retirement and you’re living off this money, being that allocated is a risk you shouldn’t be taking.
If you haven’t done a great job savings and you need to make the next decade and a half count for you, then maybe being 100% in stocks is what you need to be doing. Those are very touchy, but you’re right.
People get greedy on the upside, and that’s when they get kind of canned to the downside, because that’s what I see, too, is emotionally when times are good, and I’m doing client reviews, and we go over their asset allocation or how much stock to
bonds they have is when the market’s doing well, they inherently are like, yeah, we can be more aggressive. And then that’s inevitably pretty much near the top of markets is when people are getting really stoked about their money.
And then I talked them off that, I can say this is set for the next 10 years, not the next year. So we’re not going to get more aggressive just because it’s done well.
But that’s what people do when they’re on their own is they inherently get more risky as the market does better and better. And then they set themselves up for a much bigger loss when inevitably it does roll over.
Absolutely. So let’s talk in terms of some Millennial Money Moves that we can make in these types of markets, right? And I think it’s easy to just say go buy this and go buy that.
But if there is an avid investor listener out there right now, and maybe doesn’t work with you, Sean or works with an advisor, is it as simple as downloading a Charles Schwab or a Fidelity, or you name it and just go and buy some low-cost index
funds? Is it as simple as that or is it still important to make sure you speak with someone that does this as a profession?
I think it’s what you’re comfortable with. I think that’s what it all comes down to with doing finances on your own or not.
I’ve spoken to many different people, friends, family, clients over the last week, and there’s definitely people that are just comfortable with it.
And I’ve asked me kind of for advice, like, hey, exactly what you ask, should I be buying the S&P 500 or should I be buying the NASDAQ, which is the technology index? I’d tell them the same thing.
Look, everything is 20% to 25% off today than it was a month ago. Buy anything, like that’s awesome.
And so if you’re comfortable pulling those triggers and knowing what to buy and doing research on your own and you’re knowledgeable, then yeah, do it. But if you’re not, then talk to somebody.
Well said.
Cash is the most inefficient, it’s not even an investment. That’s just the most inefficient use of your money.
And so in these moments, I do ask some clients that I’m comfortable or have kind of the capacity like, hey, do you have any cash on the sideline? How’s your savings looking? Is it still in a great spot?
Okay, do you have anything to spare? Even if it’s $500 or 200 bucks, give it to me. Like, this is a moment that you’ll look back and be thankful you did it.
And then there’s probably viewers out there that are saving, maybe for a new car or a house, you know, the usuals.
Would they be silly to tap in on that? If they’ve, I mean, again, it’s all dependent on your situation. But to your point, cash is very inefficient.
So but if you know you have some type of purchase in the near future, is it silly to try to go buy in, hope for the return and then pull it out when you’re ready to go purchase that vehicle or the house? Or should you still be cautious?
Yeah, that just gets to a pure speculation mode right there. And so like I said, any financial goals, like buying a house, a car, that’s more around two to three years out, just cash has got to be cash. Because again, we’re using hindsight now.
So like if somebody came to me two months ago and said, hey Sean, I’ve got 40 grand, we’re looking to buy a car, probably don’t need the car for a year or two, what should we be doing? And I said, oh, you should invest that.
And now they’re down 20 to $20.
Hey Sean, thanks a lot. No, but you’re absolutely right.
They would absolutely be pissed and probably fire me just because it was just pure bad timing. Oh, so that’s why I say like if it’s cash that you need or cash that’s earmarked for something, don’t touch it.
But if it’s just like, man, I’ve got $20,000 in my savings account and I don’t even know why.
Why? Yeah.
Understand what is comfortable for you to have as that cash buffer. That’s each individual person and finances and family and relationships are going to be different and what that number is.
But if you’ve got that under the mattress money that you’ve just been piling away, like these are those moments that create legacy wealth down the line. And like you said, like these are those money moves, like take advantage of this.
And I bring it up because obviously anything you read, all the social media means and gifs is, you know, fire sell, buy now, buy now. But remember, you know, everyone has a different perspective on where they stand in their life.
So yes, we’re not telling you not to buy or you should buy. It should make sense to what you need. But to your point, exactly, if you have some wiggle room, you’d be silly not to try to take advantage of this market we’re in right now.
Yeah, don’t take your lunch money or your rent money or your mortgage money and use Fandual or DraftShop for that.
Don’t do this with the market.
Yeah, $5 at a time.
Exactly.
But no, that’s powerful, Sean, because I think that’s also important to understand that anything you read right now is going to tell you it’s a fire self. If you don’t need it, it’s money.
But still, remember, there’s always consequences to putting money into the market. And I know everything we just showed helps calm the roller coaster and calm those emotions. So you’re not checking every day and panicking, why did I just do that?
But it also means that it doesn’t necessarily imply that you have to do it either. But it’s there. And if it makes sense, why not?
And again, ultimately, I think it always comes back to talking to someone like you that does this every day. Like, this is your profession.
Exactly. Well said. That’s the perfect bow on that conversation.
That’s money moves number one in a down market. Invest more, not less. Obviously, like the caveats that we just talked about come with it.
But that’s the move. Money move number two, Roth conversions. Blake alluded to this in the cave conversation.
If you were listening to us, you should recognize that.
Sorry, I didn’t mean to jump off in the air there, but just had to say, we’ve talked about it, and look at what was it, three, a month ago, three weeks ago, here we are.
Yeah, and you just try to be strategic with it. Like I said, something that happens so fast is helpful because you don’t have enough time to think about it. You just kind of, now it’s the time to kind of do it if you can.
And so again, the whole idea behind Roth conversions is taking some of that money that is tax-deferred, that you haven’t paid taxes on, converting it to Roth, whatever is comfortable for you.
Remember, this will add to your income, so expect that tax bill the next April.
But if you could do $5,000, convert it from your tax-deferred to a Roth, when the market hopefully does bounce back, all the growth that comes back with it is now tax-free. So you’ve paid $5,000, let’s assume it’s $5,000.
So you convert $5,000, that’s $5,000 going to get added to your income at the end of the year. And now that money grows and the market comes back, and $5,000 turns into $6,000. That $1,000 in growth is now tax-free.
And so when there’s moments like this where your account’s down, the market’s down huge, we’ve just showed you it’s never stayed down or gone down to zero, it’s always kind of come back.
These are those times where if you do those conversions, again, what you’re comfortable with, but don’t be putting yourself into crazy tax brackets, and the money comes back tax-free or grows back tax-free, beautiful.
Beautiful. No, and we discussed it, but it’s true, right? These are the moments where maybe the down market doesn’t feel so great and it feels painful, but you can turn it into a bright side.
Yeah, there are moves to be made in a down market, up market, sideways market.
There’s always somebody, the stock market is a zero-sum game. So for everybody out there losing money, somebody’s making money.
And when these crashes happen, there’s a huge transfer of wealth between the people who sell out and the people who stay invested.
And that’s what I’m trying to get every listener, that alone is just understand that if you sell out, inevitably when this turns around, whoever you sold all those stocks to at a low price, that person is now making money off of it.
Well said, Sean.
All right, final money move in a down market, tax loss harvesting.
Well, baby, break it down.
This is a little intricate. So this is for your taxable accounts, not your IRAs or your 401k. This is for money that’s going to get taxed every year, talking individual accounts, point accounts, lost accounts, down markets or cost basis.
So let’s say you paid $30,000, that’s the money you put in. Now it’s worth $25,000. That $5,000 loss, you can capture.
You can recognize a loss, and you can use that loss to help offset gains. You can use up to $3,000 to offset your income.
And so that is a huge advantage for me to help offset my client’s either gains, we’ve already recognized this year, because the market had done so well in 2023 and 2024.
So this year, in the beginning of the year, I know some of my clients, we took just based on money that coming in and out, we had, we recognized some gains. So now in a down market, I get to recognize a loss to offset that gain.
And now their tax bill is nil on capital gains. And I’ve just saved them, let’s do, I’m not good at mental math. Let’s do 15 percent, which is the typical cap gains rate on $10,000.
I just saved them $1,500 in taxes.
So in that concept though, it’s a year end calculation. You can’t just pick a data cycle of like two weeks of when your investment account was down and you recognize that loss. Right?
Because if it bounces back and it’s up by the end of the year, can you still do that tax loss perspective?
Good question. So this is a tough concept of unrealized versus realized capital gains. Unrealized is you haven’t sold anything.
It’s like your house. So if your house is worth, you bought it at $400 and the market value is $500, then your unrealized gain is $100,000. But it’s not recognized or you don’t owe taxes on it until you actually sell it.
Now again, housing is a little different because there’s exclusions, but let’s just use simple things. So that’s the difference. So you can have your money just sit in your accounts, your taxable accounts, and let it ride for forever.
And if you don’t sell anything, those cap gains just build up, build up, build up, build up. And then when inevitably you do sell them, that’s when you pay the tax bill.
But what happens to most people is they’ll build up some gains and you can offset gains with losses in a down year, or they’ve recognized some gains. Maybe clients have needed to take money out.
You know, maybe there was a bad fund that I wanted to get rid of, and I had a gain on it, and I wanted to replace it with another one, so I had to sell it to get a new one, and we recognized the gain.
Well, now with the market being down the way it is, I can go offset that gain for them, so they don’t owe it taxes on. So, we’ve just showed you three awesome money moves to make in a down market.
Hopefully, we’ve shown you that these events are very cyclical. They happen. They’re a part of the ride.
They’re a part of investing. The worst thing to do is get too emotional for it and let it scare you away from making money back, because it will come back. We just saw today what happened.
He says one thing, tweets one thing, market goes up 10%.
So these are those moments where when the world seems crazy or a little irrational, remember that, like that happens and don’t let it dissuade your investing success because you have decades and decades to let this work for you and take advantage of
I think we might have to start looking into making people pay for these podcasts because that’s some great messaging and some great things you can take advantage of.
And if you’re not comfortable doing it on your own, pick up the phone. But they’re there and there’s a lot of good money moves you can make right now.
Awesome, man. That was a great emergency press conference. I love it.
Great job, Sean.
You too, brother.
Yeah, let’s get through another week and we’ll be back at it again next week with some business owner education. Yeah, let’s see how it unfolds. I appreciate you listeners.
Love you guys and have a great week.
You too, brother. Talk to you later.
Bye.
