RJS 8-9-25

Episode Transcript

Speaker 1 (00:00):
Good morning to all. Craig Shehilly here and this is
Safe Money. I'm here every Saturday to talk with our
listeners about financial strategies we use to manage and protect
assets safely. I've been an insurance agent for over twenty
four years. During that time, I've learned a few insurance strategies,

(00:20):
like using annuities as safe money harbors, or using cash
value life insurance to supplement retirement income. Just a reminder,
you can call my office at five six three three
three two two two zero zero if you'd like to
enroll in one of my virtual Medicare community meetings I

(00:40):
give two every month via zoom, or you can email
me at Craig at Craigshilly dot com. And that's my name,
Aig at cr Aig scchi lllig dot com. Today, I

(01:03):
want to talk to you guys about volatility. How to
handle market volatility. Conventional wisdom says that what goes up
must come down, But even if you view market volatility
as a normal occurrence, it can be tough to handle
when it's your money at steak. Though there's no full

(01:26):
proof way to handle the ups and downs of the
stock market. The following common sense tips can help. Don't
put all your eggs in one basket. Focused on the forest,
not the trees. Look before you leap, look for the
silver lining, don't count your chickens before they hatch, and

(01:52):
don't stick your head in the sand. So let's talk
about not putting all your eggs in one basket first.
Diversifying your investment portfolio is one of the key ways
you can handle market volatility because asset classes often perform
differently under different market conditions. Spreading your assets across a

(02:16):
variety of different investments, such as stocks, bonds, and cash alternatives,
money market funds, or short term government interests instruments has
the potential to help manage your overall risk. Ideally, a

(02:38):
decline in one type of asset will be balanced out
by a gain in another. Though diversification can't guarantee a
profit or eliminate the possibility of market losses, one way
to diversify your portfolio is through asset allocation. Asset allocation

(03:01):
involves identifying the asset classes that are appropriate for you
and allocating a certain percentage of your investment dollars to
each class. For example, seventy percent in stocks, twenty percent bonds,
maybe ten percent in cash or money markets. A worksheet

(03:22):
or an interactive tool can suggest a model or a
sample allocation based on your investment objectives, risk tolerance level,
and investment time horizon, but your strategies should be tailored
to your unique circumstances. Focus on the forest, not on

(03:42):
the trees. As the markets go up and down, it's
easy to become too focused on day to day returns. Instead,
keep your eyes on the long term investing goals and
your overall portfolio. Although only you can decide how much
investment risk you can handle if you still have years

(04:04):
to invest, don't ever overestimate the effect of short term
price fluctuations on your overall portfolio. Look before you leap.
When the market goes down and investment losses pile up,
you may be tempted to pull out of the stock
market altogether and look for less volatile investments. The small

(04:28):
returns that typically a company low risk investments may seem
downright attractive when more risky investments are posting negative returns.
But before you leap into a different investment strategy, make
sure you're doing it for the right reasons. How you
choose to invest your money should be consistent with your

(04:50):
goals and time horizon. For instance, putting a large percentage
of your investment dollars into vehicles that are for safety
of principle and liquidity the opportunity easily access your funds
may be the right strategy for you if your investment
goals are short term, or if a long term goal

(05:13):
such as retirement, has now become an immediate goal, but
if you still have years to invest. Keep in mind
that although past performance is no guarantee of future results,
stocks have historically outperformed stable value investments over time. If

(05:35):
you move most or all your investment dollars into conservative investments,
you're not only locked in any losses you might have,
but you've also sacrificed the potential for higher net returns.
Look for the silver lining a down market. Like every

(05:57):
cloud has a silver lining. The silver lining of a
down market is the opportunity you have to buy shares
of stock at a lower price. We call this a
fire sale, which means it's time to buy and buy more.
One of the ways you can do this is by
using dollar cost averaging. With dollar cost averaging, you don't

(06:20):
try to time the market by buying shares at the
moment when the price is lowest. In fact, you don't
worry about price at all. Instead, you invest the same
amount of money at regular intervals. Over time, When the
price is higher, your investment dollars buy fewer shares of stock.
When the price is lower, the same dollar amount will

(06:43):
buy you more shares. Although dollar cost averaging can't guarantee
you a profit or protect against the loss over time,
a regular fixed dollar investment may result in an average
price per share it's lower than the average market price,
assuming you invest through all types of markets. A workplace

(07:08):
savings plans, such as a four to one K plan,
in which the same amount is deducted from each paycheck
and invested through the plan, is one of the most
well known examples of dollar cost averaging in action. Please
remember that since dollar cost averaging involves continuous investment in securities,

(07:29):
regardless of fluctuating price levels of such securities, you should
consider your financial ability to make ongoing purchases. Don't count
your chickens before they hatch. As the market recovers from
a down cycle, elation quickly sets in. If the upswing

(07:51):
lasts long enough. It's easy to believe that investing in
the stock market is a sure thing, but of course
it never is. As many investors have learned the hard way,
becoming overly optimistic about investing during the good times can
be as detrimental as worrying too much during the bad times.

(08:13):
The right approach during all kinds of markets is to
be realistic, have a plan, stick with it, and strike
a comfortable balance between risk and return. Don't stick your
head in the sand. While focusing too much on short
term gains or losses is unwise, so is ignoring your investments.

(08:36):
You should check up on your portfolio at least once
a year, more frequently if the market is particularly volatile
or when there has been significant changes in your life.
You may need to rebalance your portfolio to bring it
back in line with your investment goals and risk tolerance,

(08:56):
or redesign it so that it better suits your current needs.
Don't hesitate to get expert help if you need it
when deciding which investment options are best for you. Handling
market volatility, conventional wisdom says that what goes up, what

(09:18):
must come down, But if you view market volatility as
a normal occurrence, it can be tough to handle. When
your money is at stake. Though there's no full proof
way to handle the ups and downs of the stock market,
the following coping strategies may help. You can build in
all weather portfolio. You can diversify your investment portfolio. It's

(09:45):
a key tool to manage market volatility. Different investments may
perform differently in response to the same economic conditions when
you divide your money. When you divide your money among
various asset clouds, those and investment vehicles, gains in one
area will help compensate for losses in another, which can

(10:07):
help you limit your risk of loss. Whether you consider
yourself to be a conservative or an aggressive investor. An
asset allocation strategy involves dividing your portfolio into different asset
classes cash alternatives, bonds, stocks, etc. To seek the highest

(10:29):
potential return at the level of risk you are comfortable with.
Determining the appropriate mix of investments based on your financial situation, risk, appetite,
time frame, and overall financial objectives can be challenging, but

(10:54):
don't hesitate to seek out a professional which can help
you with some of these decisions. A financial reality check
might prepare you for the next time market conditions shift.
Of course, there's no assurance that working with a financial
professional will improve investment performance. You need to focus on

(11:15):
the big picture. As the market goes down and the
market goes up, it's easy to fixate on day to
day returns. Instead, look at the long game to help
maximize your overall portfolio well. While taking a short term

(11:39):
gainer loss is unwise, ignoring your investment portfolio altogether is
also not a good idea. You should readdress this at
least once a year, if not more so, depending on
your tolerance, and rebalancing your portfolio to bring it back

(11:59):
in line with your investment goals and objectives and risk
tolerance is a good idea. Rebalancing involves selling some investments
in order to buy others, which may result in at
tax liability if they're not held in a tax deferred account.
Remember that if you have a brokerage account that's a

(12:22):
non qualified account, you will get a ten ninety nine
in January for dividends interest that were paid on stocks,
even if you reinvest in them. Keep your emotions under control.
When the market goes down and investment losses pile up,

(12:45):
you may be tempted to pull out of the stock market.
Altogether and look for less volatile investments. The modest returns
that usually a company a low risk investment may seem
attractive when more risky and investments are posting negative returns.
Before you leap into a different investment, however, make sure

(13:06):
you're doing it for the right reasons. How you choose
to invest should be consistent with your time horizon and
overall goals. Putting a large percentage of your investment dollars
into vehicles that offer asset preservation and liquidity may be

(13:26):
the right strategy for you if your time horizon is
shorter or your investment goals indicate that you're going to
need the money soon, such ass I'm going to retire
in six months, six months, one year is a different
time horizon than if you're going to retire in say

(13:49):
twenty or twenty five years. With a twenty, twenty five
year and sometimes thirty year time horizon, you still have
years to invest you all so have the time to
recover from volatile markets. Again, plan for the long term,
not the short term. Long term usually always wins. If

(14:15):
you move most or all your investment dollars into conservative investments,
you will not only lock in any losses you may have,
but you're also going to sacrifice the potential for any
higher returns as the market recovers from a down cycle.
Upswings last long enough, it's easy to believe that a

(14:38):
popular investment is a sure thing, regardless of the risks involved.
Please keep that in mind. But of course, guarantees are
never there, especially when we are talking about the market.
As many investors have learned, if you become overly optimistic

(14:59):
during the good times, that can be just as detrimental
as worrying too much during the bad times. The right
approach during all these kinds of markets is to be realistic,
have a plan, stick with it, and come up with
a comfortable balance between risk versus return. You can put

(15:19):
dollar cost averaging to work. Like every cloud, a down
market has a silver lining, the opportunity to buy shares
of stock at lower prices. You've heard me talk about
the fire sale before. Dollar cost averaging is a strategy
that leverages the opportunity by investing in a specific amount
of money at regular intervals over time. You're buying. You'll

(15:46):
buy some stocks at a fair price, you'll buy some
at a high price. You'll buy some at a low price.
The concept that is, you get more shares, eventually the
share prices should shake out. If you're doing dollar cost
averaging through whether it's your IRA or four one K,

(16:07):
those are the most common examples. Repeatedly a monthly contribution.
I have some clients to do it bi monthly, so
they get paid every two weeks, so they make their
deposits every two weeks. That's also another dollar cost strategy.

(16:30):
If you invest three hundred each month, you're regular monthly
investment at three hundred, but more shares when the price
is low, and fewer shares when the price is high.
How can you make the most of this time tested strategy. First,
get started as soon as possible. Don't wait. Time is

(16:51):
your friend and time is your enemy when we're talking
about the market. The longer you have to ride out
the ups and downs of the market, the more opportunity
we had to build a sizable investment account over a
time period. Stick with it. Dollar cost averaging is a
long term investment strategy. Make sure you have the financial
resources and the discipline to invest continuously throughout all types

(17:16):
of market conditions, regardless of these stock price fluctuations. Take
advantage of automatic deductions have your retirement contributions deducted and
invested automatically makes the process easy and convenient, and that
way you won't spend it. Although dollar cost averaging won't

(17:39):
guarantee a profit or avoid a loss, a regular, consistent,
fixed dollar investment amount may result in a lower average
price per share over time, assuming you continue to invest
through all types of market conditions. Don't forget that while
there are sound strategies, asset allocation and diversification does not

(18:02):
guarantee your profit or protect against loss. All investing involves risk,
including the possibility of loss of principle, and there can
be no guarantee that any investing strategy will be successful.
Investments seeking to achieve higher rates or return also involve

(18:25):
a higher degree of risk. Past performance is no guarantee
of future results. The right approach during all kinds of
markets is to be realistic, have a plan, stick with it,
and strike a balance between risk and return. Also, keep

(18:45):
in mind you need to have a fixed or income
annuity as a hedge in case the market tanks, You
can pull money from this account and not the equity
account when the market is down. This will give your
ex equities time to recover. Instead of taking withdrawal from
that account. You guys have heard me talk about this before,

(19:08):
but you're going to need more than one retirement account,
especially if you plan on retiring and taking taking your
own self defined pension from an account for twenty thirty
forty years. Life insurance and annuities are a great heads

(19:31):
for the market, especially when the market tanks. They don't
look great when the market is up like we have
right now. The market as a whole this year is
done pretty well, even with Trump's tweets and tariffs and
all of the political turmoil that's going on. But remember

(19:55):
the market's been on the highest it's twenty eighteen. Eventually
that's going to reset again, and it may be said
reset for a while. What if we hit another recession.
If you're close to or near retirement, most financial professionals
are going to tell you don't want to take money
from this account. Do you have another account to tap

(20:19):
while your equities are down while the market is negative.
Remember in twenty twenty two, both stocks and bonds both
went down. Now, traditionally that doesn't happen, but bond markets
are starting to get hit more and more. With one
our deficit which is going to affect our credit rating.

(20:43):
Then two will be the overall economy and how that's
affecting the overall market. Having cash in annuities, especially if
you're over fifty nine and a half, or cash value
life insurance is a great hedge. It's a great asset

(21:07):
bucket to pull money from if you need it for
a short term reason, or call it a six or
twelve month the downturn in the market. Imagine being six
months to a year from retirement in the market tanks,
your four to one k that now is worth a
million dollars is only worth a half million bucks. You're

(21:31):
not going to start pulling income from that. You will
slice yourself off with the knees. There's no way to
recover from that. But if you had a million dollar
for one k, and what if you had two hundred
and fifty thousand dollars in cash value life insurance, you
could tap a year or two of income from that
account in order to let your equities return. Or if

(21:56):
you had money in a fixed indexuity or a fixed annuity,
and you start tapping money from that for say a
three or a five year period, at least that could
cover your expenses, you wouldn't be taking that from your equities.
And then the beauty of tax rates for non qualified

(22:19):
money on annuities, especially if you're over fifty nine and
a half, Those also are very advantageous to those people
that are near or in retirement. Remember in retirement, because
you're not earning an income, all you're doing is spending money. One. Two,

(22:42):
Because you're not earning an income, you can't necessarily take
deductions for like an IRA contribution because you have to
have earned income first, So your deductions also go down,
which generally means your income tax rate can and does
sometimes go up. Especially if a spouse deceases, then you've

(23:04):
gone from marriage household status to single tax status. That
issue comes up a lot. A surviving widow eventually gets
bumped into a higher tax bracket by being able to
draw money from annuities or a cash value life insurance
and not your IRA or spousal IRA or having to

(23:30):
take our MDS if you don't need the money at
age seventy three. Those are great buckets of money to have,
so please keep those in mind. Again, annuities and life
insurance aren't sexy. They don't have sizzle. We don't talk
about them at cocktail parties, but they're pretty strong, especially

(23:51):
when the market's down. They got teeth, I mean, And
who doesn't like a tax free check? I mean, young
people don't really understand what that is, but retire is
sure do. They love tax free checks. So do beneficiaries.
So don't forget that. Don't forget I give monthly virtual

(24:14):
meetings regarding Medicare for two different companies every month. In
one meeting, I will cover Medicare supplement plans with a
standalone drug plan. That meeting sponsored by Wellmart. United Healthcare
is a sponsor. For my other virtual meeting, I focus
on the Medicare Advantage plan known as Medicare Parts C,
and I cover the benefits of that platform. Also note

(24:38):
there probably will be a lot of changes to Medicare
for twenty twenty six. I won't have details on that
until first week of October, but there's a rumor there's
going to be a lot of benefit changes for twenty
twenty six, so stay tuned on that. You can call
my office at five six three three three to two

(25:00):
two two zero zero for the zoom meeting codes and
additional dates and times. You're also welcome to email me
at Craig at Craigshillig dot com. And that's my name,
c R a I G at c R a I
G S c h I L l I G dot

(25:22):
com and I'd be happy to send you the virtual zoomlink,
meeting codes and additional dates and times. This is Craig
Shillig with safe money.