When Is A Good Time To Invest? | Brandon Averill, Justin Dyer | AWM Insights #82
Enjoy AWM Insights? Leave us a 5-star rating & review to help others like you discover the show!
Episode Summary
Whenever you have the money, it is the best time to invest. The caveat is that you must have a customized, well thought out plan that you can stick with over the long term. The market will always give you an excuse to wait. The problem is that waiting has proven to cost investors sitting on the sidelines huge amounts every year.
Markets are rallying this week on an agreement to raise the debt ceiling temporarily, the COVID delta variant is declining, and Russia is agreeing to pump more oil.
Does this mean you should wait until markets go down? No, because without the structure and process to get invested, you will always find a way to put off investing until next week. When markets were going down aggressively as they did in March 2020, you would have said: “I’ll just wait until they go lower.” No one rings a bell for you that the market has bottomed. Calling market bottoms and tops is purely luck. Anyone telling you differently has something to sell you.
Something to keep an eye on is the release of the Pandora Papers. This is a follow-up release to the Panama Papers by the International Consortium of Investigative Journalists. It is fascinating to see hugely influential world leaders and celebrities doing whatever they can to evade taxes. A key distinction here: tax avoidance is perfectly legal and should be implemented as part of tax planning for anyone paying large amounts of taxes. Tax evasion is never worth the risk, especially when you are high profile.
Episode Highlights
(4:19) Markets are rallying from the recent sell-off because some of the uncertainty over the debt ceiling has been removed. Republican and Democrat leadership have agreed to fund the government through December.
(4:35) Is now a good time to invest? It’s always a good time to invest. Markets reward investors over the long term.
(6:10) Wall Street has a playbook of calling you when the brokers see markets decline. They then tell you to buy the dip like they alone can predict the future. This is salesman 101 trickery at its core. The reality is your investment plan should already be fully invested. Sitting on the sidelines is harmful to your financial priorities.
(8:00) Returns have been above average so far year to date. Volatility is elevated but at historically normal levels. Markets will always give you a reason to wait to get invested. They are very good at appearing like they can’t keep going up. All of the data that exists for long term investors tells us otherwise.
(9:30) March 2020 and the perfect time to invest. The problem is the entire world was shutting down and uncertainty of the future of the world economy was at its highest. It only now looks like it was a no brainer with the benefit of hindsight.
(10:20) The real question is, when would you feel comfortable investing? Creating a financial plan and sticking to it with a long-term philosophy is how you achieve success in investing.
(12:30) There will be another financial crisis. They have happened many times in history so they should be expected in the future. It is the price of admission for the returns of the market. The way to take advantage of it is to have a customized financial plan with a portfolio implemented to make you financially bulletproof through these periods.
(14:20) Volatility in the equity market should not be affecting your priorities. If it is, you do not have a good financial strategy/advisor.
(15:20) Recognize your human capital as the asset it is. Converting your human capital to financial capital over time is what creates generational wealth.
(16:35) Atomic Habits by James Clear, “Professional stick to the schedule, Amateurs let life get in the way.”
(17:45) Whenever you have the money, it is a good time to invest. But you must have a well thought out plan that is diversified across markets and a long term philosophy. Without it you are just a rudderless ship at the mercy of the wind.
Stay Connected
AWM Capital: IG | LinkedIn | Facebook | AWMCap.com
+ Read the Transcript
Brandon Averill (00:00):
Hey, everybody. Welcome back to AWM Insights. Each week we cut through the noise of what Wall Street is selling you, to bring you the knowledge, skills, and access that you need to invest like a pro. And today we are tackling an interesting topic, the one that you're always asking is now actually the good time to invest? But before we dig into all of that, let's shoot over to the news. Justin, what do you got for us?
Justin Dyer (00:25):
Sure. I mean, there hasn't been a shortage of interesting things going on in the world, that's for sure. We can definitely start there. On a positive side, it looks like there's been an agreement as of this time we're recording this between the Republicans and the Democrats on the debt ceiling. That's providing much needed support to the markets and something we'll talk about within this conversation. Jobless claims have ticked lower for the first time in four weeks, also driving some support for the market there. So looks like we've kind of turned the corner from this whole delta variant spike with respect to COVID. So we'll see if that trend continues. I know we always say here that a lot of these statistics can be incredibly noisy, so keep that in mind, but definitely something moving in the positive direction.
Justin Dyer (01:16):
Facebook, I mean, that's been definitely in the news, a whistleblower coming out and accusing them pretty bluntly of favoring or prioritizing profits over public safety, using their own internal research too. So that's a story that will continue to percolate, I assume.
Brandon Averill (01:38):
It's pretty amazing this is even a news item, given that the fact, this is the point of media, right? Facebook's a darn media company. Are we going to go on CNBC and accuse them? Like now you're going to be able to sue them over some stock going up and down. It seems kind of crazy. Like this is the whole role. They don't really care all that much about the wellbeing, otherwise we wouldn't have financial news services, right?
Justin Dyer (02:00):
Oh, totally. Well, and it's also kind of like everyone knew that, right. Is this really news? I mean, I guess it's actually verifiable proof to an extent if we believe this whistleblower, but I feel like anyone you talk to who's a user of social media probably can attest to the fact that these things are not necessarily designed to be your friend really. Moving on, this is also something that's kind of surprising as well. California passed the law, requiring food delivery giants to pay all tips to drivers, meaning that surprising it wasn't in place to begin with. I'm sure most of us who use those services probably expect that when you add that tip, it is going to the driver. So protecting the little guy there.
Justin Dyer (02:49):
Big news on, I guess, call it the global front. The Pandora papers, big, huge release of data from an offshore law firm, exposing a number of very high profile people, both in business and government around the world doing guess what? Trying to avoid taxes, shield their wealth.
Brandon Averill (03:13):
Hide their money.
Justin Dyer (03:14):
Hide their money. It's kind of that age old problem. It's probably never going away unfortunately.
Brandon Averill (03:22):
What's fascinating about this though is, right, these documents came from 14 separate banks. How were they able to assemble this much sensitive information? I mean, yeah, there's got to be a paper trail here. There's going to be some people in the whole heap of trouble, you would think.
Justin Dyer (03:42):
I'm sure, they're not going to go quietly on this one. On the sports front kind of lighter tone here, Giants and the Dodgers are playing against each other NLDS for the first time ever. It should be arguably one of the better series or let's hope, let's hope. I mean, there's going to be a lot at stake and a lot of hype around it, but certainly something fun to watch out here on the west coast.
Justin Dyer (04:04):
And then kind of turning to the main topic here. So as of this recording markets are up really strongly today, kind on the back of that debt deal that we mentioned. Russia has said, they're going to step into the oil markets to help appease or assuage the rise in price there that spooked people, generated some more fear around inflation, et cetera, et cetera. So markets are happy today and it goes back to the topic at hand. The question that Brandon you pose, is now a good time to invest. I mean, it's an age old question. It's something people are probably asking themselves each and every day.
Brandon Averill (04:43):
Yeah. I mean, I certainly don't want to invest today, right? Markets are up. I should wait. Don't you think?
Justin Dyer (04:49):
Oh man, yeah. Let me take out my crystal ball and tell you. I mean, look, the short answer is, it's always a good time to invest. You never know what tomorrow will bring, but we know that markets reward investors over the long term, that long term participation, the discipline. And look, we're going to get into more nuance around all of this stuff. But the short answer is, it's always a good time to invest. It's never a good time to be overly fearful, to overcomplicate things. It's good to ask these questions and have these conversations, certainly. But if you are asking yourself, hey, I have this money, it's for the long term, I want to orient or build a portfolio, a structure around my priorities for my family and build multi-generational wealth, whatever the case may be, any and all of those things, generally speaking, it's always a good time to invest. Markets have rewarded investors time and time again, over the long term.
Brandon Averill (05:59):
Well, I think it's fascinating too. One of my favorite things to hear actually it's not my favorite, but it's fascinating to hear is, when you grow up in the Wall Street firms, like when we started at Morgan Stanley, right, one of the first playbooks they give you is, hey, we get a market decline, you start dialing for dollars baby. You start calling and saying, "Hey, we got to buy the dip. We got to buy the dip." Go get that money. If somebody's calling you and saying, buy the dip, all they're saying is you have no plan because you have some money sitting somewhere that now we should invest. When in reality, like you just hit on Justin. I mean, if you have a comprehensive plan, if you're an investor, meaning that you're actually putting money to work for long periods of time, and you just have cash sitting on the sidelines that could or should be invested, you're most likely causing yourself negative harm, right. Your harm.
Brandon Averill (06:57):
You're sitting on the side and we know this, we've gone back to the stats time and time again, but time in the markets, what matters missing the biggest days impacts your overall return significantly. So just waiting for this day of a decline is pretty silly, yep. We all kind of get back into it. And I think that's something that should ring true in everybody's ears. If somebody calls you and says time to buy the dip, it means that that person calling you is a salesperson, probably working at one of the Wall Street firms and as a broker, as opposed to a planner that wants your holistic wealth to be addressed.
Justin Dyer (07:36):
Yeah. And we can go through a couple of different mental exercises, I think to underscore this, not anything wuji wuji here, but just take a step back, right. Markets are at all time highs, markets are doing well. We've had a pull back, it's been volatile of late. First of all, for the year, markets are above average. The S&P 500 is somewhere in the low teens in terms of rate of return for the year. So it's going to potentially in all likelihood end up being a very good year above average for the S&P 500. So that's one thing. The short term volatility probably makes people a little bit more uncomfortable. September was a weak month. The quarter was basically flat. So you have to remind yourself, hey, let's take a step back and look at the longer term what's been going on. And then even longer than that, what do markets generally provide the long term to speaking five, 10 plus years, the long term disciplined investor, and that reframing should help you set your expectations going forward, right.
Justin Dyer (08:46):
Additionally, let's flip this on its head. So markets have performed really well. Markets have been at all time highs, they're off those all time highs, there's some negative volatility, so that gives people some angst and unease. On the flip side of it is when markets correct, go back to March of 2020, markets were down over 20% because the economy, literally the global economy was shutting down. No one had any idea what was going on, at that point in time, when markets were at their bottom, that was a great time to invest. I could guarantee you probably no one predicted that. I shouldn't say guarantee. We're not allowed to say that, right. But I mean, just think about the difficulty and put yourself in that mental space where the global economy is literally shutting down.
Justin Dyer (09:36):
We have no idea what this new virus truly is, really. There's just so many unknowns and you have to make your decision then to invest. I mean, that's even harder than it is right now. Right now, there are some questions certainly that people are asking. And again, rightly so these are always good questions to ask and have conversations around, but just think about the emotions, the behavioral side of making that decision in that moment. I mean, it's incredibly difficult if you don't have a plan. I mean, we're going to probably underscore that time and time again. So the question to ask yourself too is, or flip it on its head again, is not, is now the time to invest? If you're asking that question, when would the time be to invest? Like when would you actually feel comfortable investing?
Justin Dyer (10:33):
We could go out through a laundry list of fears around investing, and they're all common that most people have them, but taking a step back, understanding what the data shows you, understanding your plan, sticking to it in times of difficulty is critical and keeping a focus on the long term. And now I'll stop. Sorry, went on a little bit-
Brandon Averill (10:58):
Yeah, no, I think it's an important point. And I think it even going back to your March of 2020 example, what does success look like during that period? Because it's certainly not sitting on your hands either, right? You still want to take advantage of the moment and the way that a professional takes advantage of the moment is that they go back to their plan. So in your instance, right, you've got, yeah, equity markets declined. You are fully invested. It doesn't mean that well, shucks, that's a bummer I just wore that.
Brandon Averill (11:30):
No, what ends up happening, right, is that if you've built your portfolio to your priorities, it is now out of balance. And do we get to do, right. We get to rebalance and bring it back into line with our priorities. We take advantage of that. We do things like tax loss harvesting, right? They are the smarter decisions to be made during those time periods, rather than trying to convince somebody in one of the most uncomfortable scenarios that now all this dry powder that's been sitting on the sidelines, it's time to invest. And let's not forget that, you probably, if you were sitting on that dry powder at that period, you'd been scared for years when the markets had absolutely roared. So you missed out that whole period.
Justin Dyer (12:15):
You missed out on a ton. Unfortunate.
Brandon Averill (12:16):
Yeah. I mean, it's unfortunate. We've seen this play out with people time and time again, but I think it's that whole deal like right now, people I'm scared there's going to be another financial crisis, right.
Justin Dyer (12:28):
There will be.
Brandon Averill (12:31):
There's all kinds of ... what's that?
Justin Dyer (12:32):
I said, there will be.
Brandon Averill (12:33):
Yeah, there will be, right. And that's part of it, that is a great point. I mean, we are rewarded for going through financial crisis, right. That is the entire point of investing and trying to time when that's going to happen. And when it's not, if you're afraid of that financial crisis, because it is going to something to your portfolio that doesn't allow you to provide for your priorities in the short term, that you have a whole different problem that we're worried about, right. So I think that's the other point is that financial crisises are going to happen. If you've built your portfolio in a way to match up to your priorities, then yeah, that's going to be uncomfortable, but it does not impact your overall financial stability.
Justin Dyer (13:19):
Yeah, totally. And then, let's talk through some real world examples here. Most people are not investing the vast majority or their entire portfolio, whatever that consists of, on a single point in time. If you are farther along your financial life or your life in general, you've likely been investing for 20, 30, 40 plus years. Maybe you're just engaged with us as a new partner in this journey, but that's not a starting point. Your investing life cycle has been for 20, 30, 40 years and you have benefited from that and this is just a continuation of it. We're going to structure the portfolio, kind of what Brandon was alluding to. So volatility in the equity markets does not put your priorities at risk, but you're still, if you're investing in the markets, you are still a long-term investor and predicting the next crisis.
Justin Dyer (14:29):
By definition, I mean, it's a crisis, you really can't predict those things. We can't predict that. So again, now is a good time to invest for the long term. Is it the best time in history? Hey man, it's hard to tell. I mean, we don't have a crystal ball. It could be, the markets could continue to run from here through a new repeat of the roaring twenties going back to the early 1900s, or this could be the start of a little bit of a correction. But if you're a long term investor, you have that discipline, your priorities are protected. You still will expect a positive rate of return in the equity markets over the long term.
Justin Dyer (15:09):
Going back to the young guys just getting started or young individual, young woman, whether they're an athlete, whether they're a founder, you have your human capital asset in front of you as well and that is going to be such a powerful driver of return. Your portfolio, however, big or small it might be today is going to compound over such a long period of time. That you'll be amazed in 20 years, looking back on it, how big it grows to.
Justin Dyer (15:41):
Additionally, you are going to start converting your human capital to financial capital, put it into the markets over time. You're almost dollar cost averaging because you have to, as you convert and realize you're human capital. And so you're not putting everything into the market today, you're putting some in today, you're putting some in, whatever next month or quarterly, or if you have a big liquidation event through an exit or something like that, there's all these self or these different liquidity events or cashflow events that help you buy at various points throughout the life cycle and being disciplined today and starting today really will set you up for success long term.
Brandon Averill (16:29):
Yeah, I think that's a great, fantastic point. And I think the other thing, it reminded me and I reached back to grab this book. I was reading it, Atomic Habits by James Clear this morning. And just habit formation, this is such a great analogy to me, but I had highlighted and he had said he was talking to an Olympic coach and he said, the Olympic coach was quoted, at some point it comes down to who can handle the boredom of training every day and doing the same lifts over and over again. This approach that we're talking about is not very exciting, right? It is about being disciplined and doing the same boring thing over and over again, right. It's being broadly globally diversified. It's not hitting the high flyer stock here or there, you are hitting that, but it's in the context of your greater portfolio.
Brandon Averill (17:20):
But he goes on to be quoted in saying too, and I thought this ties it all really back together really well, is that professionals stick to the schedule, amateurs let life get in the way. And I think it really comes back to what we're talking about here is, stick to your plan, really understand what you should be doing, know that you should be invested throughout all markets. Every time is a good time to get in. Whenever you have the money that you are able to invest, that is the right time to actually invest your money.
Justin Dyer (17:53):
Right. And again, with a plan, with a well thought out approach to public markets, with a well thought approach to private markets. And I disagree with you, Brandon. I think it actually is interesting. I mean, I know where you're going there, but honestly, if you got kind of dig under the hood and we talk about this, I mean, we have a weekly podcast and we get to talk about it and hopefully it's not boring to everyone else. But you can go under the hood and it is fascinating how all of this stuff works.
Justin Dyer (18:25):
I mean, yeah, let's talk about how the debt limit actually impacts markets. If you're interested, happy to have that conversation with you. But to Brandon's point kind of sticking to it, those atomic habits, the showing up, putting in the reps, et cetera, et cetera, that's truly what pays dividends. Let's talk about kind of the why around ending up with that inclusion and that plan and that practice and the why is really interesting, at least in my opinion, but yeah, if you can connect those dots and be disciplined exactly. And build those atomic habits, I mean, you're setting yourself up for success, whoever you are.
Brandon Averill (19:05):
Yeah. No doubt about it. Well, we appreciate your time today. Head over to awminsights.com. Download the 10 key principles to investing like a pro. And until next time, own your wealth, make an impact and always be a pro.