April 7, 2025 • 53 mins
📈 Between April 3rd and 4th, the stock market dropped 10% and the S&P 500 is down nearly 15% so far this year. That's huge in such a short period of time and downright frightening! So, what do you do? Start by listening to this episode where Bill and Jackie take a deep breath, and discuss the impact of these recent market declines. There is a natural human reaction of fear, but they share tips on tempering those emotions and remaining levelheaded during volatile times. They also talk through the importance of understanding stock market history and cover practical strategies like rebalancing and tax-loss harvesting. They highlight personal experiences from past market drops like the 2008 financial crisis and the COVID-19 market scare, stressing the significance of maintaining a long-term perspective.
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RESOURCES MENTIONED ON THE SHOW:
A Guided Meditation for When the Stock Market is Dropping (JL Collins)
Bogleheads Investment Policy Statement
Rob Berger: Trump, Tariffs and Turmoil | Live Q&A (recording)
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
I think the reason why you're still kindof levelheaded and I think I am, but , we
get a little nervous like everybody else.
I think the main reason is that,we know stock market history.
We know that, , the marketgoes through normal cycles.
Of course, a lot of people are sayingthat this is different because you
know of the political risk, whichI learned about in my CFP classes.
(00:22):
That's another risk that existswhere policy and politics can.
Pose some risk but regardless of,you know, why, we know that we've
been through all kinds of situations.
, covid, nobody predicted that.
And of course, that was so different thananything else, but here we are today.
(00:43):
so of course we always see theheadline when the market's down.
Oh you shouldn't worryabout it, you'll be fine.
And I'm not saying that's nottrue, but I feel like we should say
stop telling people not to worry.
It is natural and normal forpeople to worry, to be fearful.
I mean, in the moment, likeright now, it is frightening.
(01:05):
That's okay.
Acknowledge the moment.
Now people will worry and feel scared,just like we are, but we put together a
few things that you can do with that fear,
this week has been a little rocky.
Next week might be rocky or still.
We'll still be hererecording, catching up to FI.
(01:27):
We'll try and bring you sortof more actual contemporary
podcast at times on Wednesdayswhen things like this do happen.
It's a fun discussion.
You know, I wanna close probably withreading a quote from Jesse Kramer,
one of our prior, prior guests.
'cause he took a bunch of callstoday as a financial advisor from his
clients about, okay, I wanna do this.
(01:49):
And he is like, well.
Let's not do that, andlet me tell you why.
But what he wrote today in ourcommunity, I think is appropriate.
Just wrote these words toconcern an investor this morning.
We don't let fear, panic,or other negative emotions
guide our investing decisions.
We also don't let greed orexuberance guide our decisions.
Good investing is inherentlya non-emotional practice.
(02:11):
It's not easy though.
If it was everyone we knowwould already be doing it.
Times like these especially arewhen our metal is tested, this is
when the millionaires are made,when you can stay the course here
and keep dumping cash on the fire.
(04:04):
Hello and welcome backto Catching Up to FI.
It's Friday, April 4th.
Oh my goodness.
What,
Ooh Lord, we survive.
Bill, I had to break out the wine.
Are you kidding me?
This?
(04:24):
Ooh Lord.
I'm celebrating this
week being
over.
Are you kidding me?
Is it over?
That's the question, right?
That it.
Well, this week is, we needthis, this is Friday, April
the fourth, like you mentioned.
So I need a pause.
I'm gonna enjoy these next two dayswhere the market is not open, you know?
Yeah, we didn't trip any circuitbreakers, but it looks like we came close.
(04:48):
Yeah.
So let me get a glass ofmy wine before we have this
conversation.
we haven't had a week like this since2020 or something close to that.
Yeah, that was I believe from January,2020 to April, 2020 was the Covid Scare.
And we had a big drop and probablyprior to that bill 2008, that was
pretty awful because honestly, youknow, I remember 2008 and that's when
(05:13):
I started most of my investing, but.
What was different was that therewere multiple markets going down.
The real estate market, the stockmarket, like the bond market,
every single market went down.
Right now it's prettymuch the stock market.
So far the real estate marketis still, pretty strong.
So we made it, we madeit out of this week.
(05:33):
We'll have to see what next week's brings.
But we had
I
was a
little distracted because I, youwere visiting me at home and we,
we were having lunch together again
At a cool Thai restaurant.
What was the name of that restaurant?
Let's give 'em a shout
out.
Took,
took,
took.
took.
took.
I thought it was a cute name.
It was right off of the interstate.
So I visited my sister for her birthday.
Happy Birthday Gwen.
(05:54):
We celebrated in Atlanta at a, Itold you about this really cool
place called the red phone booth.
Okay.
Yeah, that's right.
It's a cigar bar.
You gave my wife a cigar tocelebrate getting, getting through
a healthcare journey that we'vebeen on over the last year.
Yeah, she deserved it.
But yeah, on my way backyou're like, well, if the time
works out, you know, stop by.
And we got a great Thaiplace that's right off
(06:15):
the interstate, so I'm like, why not?
I gotta have lunch
somewhere.
Well, what's interestingis, you know, if we hadn't
looked at the market, lifewouldn't have changed.
Here we are having lunch, but youand I being finance, you know, geeks.
You may have taken a peak andwe're like, oh my goodness, the
tip just got more expensive.
Or something like that.
but but the world didn't change.
It didn't fall apart.
Finances were falling.
(06:36):
There was red in the streets.
But , I don't feel any different todaythan I did at the beginning of the week.
Quite honestly.
I.
Yeah.
It was a pretty e exciting week.
You know, probably more to the badfor most people, but yeah, so I think
the reason why you're still kind oflevelheaded and I think I am, but , we
get a little nervous like everybody else.
I think the main reason is that,we know stock market history.
(06:57):
We know that, , the marketgoes through normal cycles.
Of course, a lot of people are sayingthat this is different because you
know of the political risk, whichI learned about in my CFP classes.
That's another risk that existswhere policy and politics can.
Pose some risk but regardless of,you know, why, we know that we've
(07:19):
been through all kinds of situations.
, covid, nobody predicted that.
And of course, that was so different than
anything else, but here we are today.
Yeah, I mean, tariffs are
just one
thing.
We were due for a correction.
Hell, we've probably beendue for another bear market.
It's been five years, we're overdue.
(07:40):
So some of this is very predictablebecause it happens, A correction
happens once a year, right?
Something like that.
And we haven't had a correctionin a couple of years.
And a correction, just to define it,is a 10% drop from peak to trough.
And so we can define it for other folks.
A bear market is a 20% drop from peakto trough, and we're not quite in the
bear market in the total US NASDAQ is.
(08:00):
It's 22% down from February 19th,which was our most recent peak.
But we're close and itcould, come on next week.
We don't know what's gonna happen.
We can't predict nothing.
My crystal ball is totally cloudy.
Right.
Mine is cloudy.
So anyone that with confidence issaying, it's gonna last this long,
it's not gonna happen anytime.
So, you know, those areopinions that, everybody has.
(08:23):
We, the the right answer is we don't know.
There are certain things thatwe don't have control over.
So you can either focus on thethings that you don't have control
over and be very, very frustrated.
Or you could say, you know, what,what things do we have control over?
Does knowing historically how the stockmarket performs matter and does it help?
(08:44):
So that's what our goal is today.
We went through a rough time this week.
This is the first week of April and.
The reason why everyone's talkingabout it is because of the
rapid drop in the stock market.
And what does it bill two days in a row.
Thursday and
Friday we were down more
than 5%.
(09:05):
Yeah, let's go over the numbers here.
we
got,
so the S&P500 was down 6% on Friday.
It's down 7% for the week, 14% year todate, and then down 1% for the year.
That is the last 12 months.
So we've lost an entire yearof gains that are wiped out.
Right.
Yeah.
As of Friday, April the fourth.
And I think we'll allbe remembering this day.
(09:27):
It'll go down in history.
Right.
So so yeah, so those arethe interesting numbers.
And many of you may be familiarwith the most common indexes, but
you know, let's just mention them.
So typically if you're listeningto C-B-C-C-N-B-C or something like
that, they talk about the dao.
The DAO is the 30 really big.
Companies that's beenaround for a long time.
Okay.
I generally don't like to use that onebill because it's only 30 companies.
(09:49):
I usually like to reference the S&P500,which is the 500 largest US companies.
So when you just mentioned,, down on, 6% on Friday and so
forth, that was the S&P500.
And the other common onethat you mentioned was the
nasdaq.
So what does the NASDAQ represent, bill?
That's the 2000 largestcompanies on that exchange.
(10:10):
And it's tech heavy, whichis why it's down more.
That's the only thing you needknow is it's gonna have the
magnificent seven in there.
And when tech falls.
That falls greater.
Yeah.
Yeah.
So, so when we mention those, those arejust the most commonly referenced indexes.
Okay.
So, for my, my numbers and my littleold portfolio, so I, I've been retired
(10:32):
for six years, so that's importantbecause, you know, you, you made a
great post in our Facebook group today.
and and we'll mention some of the feedbackthat you got in our Facebook group, and
if you are not a part of a Facebook group,just go to catching up to fi on Facebook.
It's very active and we had a verygood, productive exchange on that post.
So thank you for posting that.
But, but here's what my numbers look like.
(10:53):
Bill.
You know, I'm pretty transparent, so I'lljust use myself as an example, right?
So my portfolio at the beginning ofthe year was roughly $1.8 million.
Those are my investible assets.
I've lost 20% since thebeginning of the year.
So roughly that's about $360,000.
Ouch.
Right?
That hurts.
But I haven't lost anythingbecause I haven't sold anything.
(11:17):
Right.
So.
I've been retired, like I said, forsix years, and most of my investible
assets are in a growth index fund.
I've talked about it before.
But then I do have an individual stockportfolio, but I always like to stress
that probably most people don't need tobe having an individual stock portfolio.
(11:38):
That's just something I enjoy doing.
I analyze great companies, butthat is a part of my situation.
So, if I had to break it up,I would say 80% is in the
growth, stock and index fund.
About 15% is in my individualstock portfolio, and the other
5% is in cash because again, I'mretired, so I need to have money to
(12:00):
live on, so I can't be too risky.
Okay.
So my growth fund has been down.
A bit more than that.
V-T-S-A-X-A total stockmarket fund or the S&P500.
So if so, let me give you someother numbers that I have.
So, okay, so my year to date, my year,the S&P500, year to date is down 14%.
(12:23):
Year to date my investibleassets is down 8%.
And over the past year.
The S&P500 was down 1%.
We just knocked out all the gates.
But my individual my investibleassets altogether was up about 7%.
So fine.
Happy with that.
(12:43):
But again, I've got VUG and then I'vegot my individual stock portfolio.
So, but that's just one example.
That's
how my numbers shake out.
What, what does yours
look like, bill?
Well, I'm in the
75 25
portfolio, roughly 20% bonds, 5%cash, and 75% equities divided into
an 80 20 between us and international.
(13:05):
And I'm down 7% year to date and I'mup over about 8% over the last year.
So a little bit better than youbecause I'm more conservative, but
not as much as I might've thought.
But we just ran thosenumbers and it is what it is.
If you look at, depending on yourportfolio and these percentages,
it could be hundreds of thousandsof dollars that disappear.
But if you don't sell, you still havethe same number of shares and you're
(13:29):
able to buy shares at a discount now.
So Yahoo.
Yeah, e exactly.
So I knew that yours would be doinga little bit better because you are
a little bit more conservative whereyou plus international has been
doing well, so that's helped you too.
Right.
And then the, you have bonds,so obviously they are not gonna
be down quite as much as stocks.
(13:50):
so so for my single stock portfoliothough, just back to that people
are always interested, youknow, what are you invested in
and you know how they're doing.
Well, I could tell you most ofmy individual stock portfolio, my
individual stocks most of them are red.
Most of them are down over the lastweek, some of them down year to date.
But however, there's aglimmer of hope here.
Bill.
There's a glimmer of hope andI did have four stocks that.
(14:14):
Are up year to date, do You know?
You kind of know what my portfolio is.
Oh, you know what?
we share a
stock
that is up year
to date and that is Berkshire
Hathaway.
Yeah, we do.
We share that one.
That's my only individual stock,but it functions as a mutual
fund, so I don't really count it.
Right.
And that is my largest holding.
So that year to date is up.
9%. And let's see, then McDonald's.
(14:38):
I have McDonald's that's up 5%.
Kroger.
Is up 11%.
And then Northup Grumman, whichis a defense company, is up 5%.
So I got some little glimmer ofhope there, but again, I don't think
that everyone needs an individualstock portfolio unless you have the
inclination in the interest like I do.
(14:58):
But it was kind of nice tosee a little bit of ray of
sunshine and all this
cloudiness and all
the red,
so.
Yeah, I mean, peopleare talking about this.
We
had over 140 comments inthat little post that I made.
You know, it's certainlyon people's top of mind.
It's been a while since we've been here.
We need to remind everybody toacknowledge your emotions first, right?
(15:19):
'cause you're you're gonna havethem, but you can't necessarily
act on those emotions.
Yeah, so of course we always seethe headline when the market's down.
Oh you shouldn't worryabout it, you'll be fine.
And I'm not saying that's nottrue, but I feel like we should say
stop telling people not to worry.
It is natural and normal forpeople to worry, to be fearful.
(15:41):
I mean, in the moment, likeright now, it is frightening.
That's okay.
Acknowledge the moment.
Now people will worry and feelscared, just like we are, but we
put together a few things thatyou can do with that fear, right.
To try to turn it around.
So one of the things Imentioned was like in 2008.
(16:05):
I was investing and Iremember how bad it was.
And a lot of you that arelistening, you lived through 2008.
Well, I feel like it was almostfive times worse in 2008.
And one of the things that I didmentally is mentally I bottled up
how I felt in 2008, because when Ithink about after 2008 what happened?
(16:28):
It was pretty darn good, and Ithink that's part of why I was
even able to retire early, thatthat helped grow my assets.
And so if you can bottle up how youfeel today and remember the next
correction and what happens afterthat correction or after that market
drop
it could serve you well going
forward,
(16:50):
Yeah, I mean the first thing you gotta
do, just like being alate starter is pause.
Take a pause and then plan.
Well, you gotta have an investorpolicy statement, right?
That tells you what you're goingto do in these times of stress.
So you don't have to wonder, you don'thave to make it up as you're going along.
Hopefully you have something writtendown on one page of the, when the
(17:14):
market crashes, 'cause it's going to.
A crash is 30%, we're close to 20%.
So we're edging towards the bear market.
What am I going to do at 10, 20, 30%?
Am I going to rebalance?
Am I gonna do some other of these thingsthat we're gonna talk about today?
So the plan needs to be made beforethe events happen, is what I would say.
(17:35):
And don't let youremotions run away from you.
If that does happen and youdon't have a plan, it's time to.
Pause and put one together.
And if you're gonna doanything, don't do anything.
Just stand there.
Yeah.
And Bill I'm curious, so withyour investor policy statement,
are you following what you put in
that
statement right now?
(17:56):
Yeah.
Assuming we crossed the 20% thresholdinto our bear market on rebalancing.
I'm taking outta bonds and puttinginto stocks just to, you know, buy
what, it may not be the bottom.
Who knows where the bottom'sgonna be, or we're cloudy.
But at 20% I rebalance, and if itgoes to 30%, I'll rebalance again.
Okay, so we actually did havea question about rebalancing.
(18:19):
So we'll get to that toward the end.
But you can explain what rebalancingis so that, everybody knows what that
actually means on the execution side.
So you know, I do have a bias alongthe lines of health savings accounts.
So I hear all the timethat people say, oh.
I didn't even know Icould invest in my HSA.
I've got $20,000 sitting in there.
(18:39):
So honestly, now's a prettygood time to deploy that.
But if your HSA is set up where you wantit for a long-term vehicle and you wanna
use it in retirement where it makessense to invest it now would not be.
A bad time and I started investing inmine in 2008 and that's why it has grown
(19:01):
so much to where it's over $200,000.
Even with the market, drop and everything.
This week it's stillover $200,000 in my HSA.
So go check your old HSAs if you gotany old HSA that's just sitting there
and you wanna use it, for long term
and you think you wanna invest it,
Now would be a great
time.
Yeah, I mean this, it's, it's agood time to talk about rebalancing
(19:24):
too, because every aspectyour portfolio has.
Has sort of a, a risk profile.
And for me, an HSA is a high risk profile.
It's all a hundredpercent equity index fund.
I pick one of them and, and actuallyin my case, it's an 80 20 of my
equity between US and international,but it's a hundred percent equities.
And the same is true in my RothIRA, but across all the individual.
(19:47):
Funds that I have, whether it be aRoth 401k or IRA, each of them has
their own kind of risk portfolio, buta across the entire portfolio, it's
a 75 25, and you can, while you canhave an individual risk allotment
in your HSA or your Roth IRA, acrossthe portfolio is where you rebalance.
(20:09):
And you know, rebalancingis often bonds to stocks.
It's a good idea to hold bonds inyour tax efficient pre-tax portfolio
so that it's easy to rebalancewithout any tax consequences.
It's harder to do in an after taxbrokerage account, for example.
You can do it, but you'regonna see capital gains.
(20:30):
It's easier to rebalance withinyour tax protected accounts.
That's a general look at rebalancing.
Does that help Jackie?
Yeah, because one of our communitymembers was like, I'm not sure what
rebalancing actually looks like.
So you gave a good explanation.
But I think also a really good scenariois like in your 401k or your employer
sponsored plan, whether it's a, thriftsavings plan, 401k, 4 0 3 B, and actually
(20:54):
we had a very smart community member that.
Replied to the comment andI thought did a great job.
But basically if you're doing it in your401k or something like that, and your
goal is to be 80% stocks, 20% bonds,well, if stocks are sucking really bad
like they are now, well now your bondsmay represent 30% and your stock is 70%.
(21:18):
So how do you get that?
In balance.
So rebalancing says that you wouldgo in and say, let me switch,
make sure or let me get this backto the allocation that I want.
I need it back to the 80%stocks, the 20% bonds.
Some people will,
how, how frequent would,would someone do something
(21:39):
like this
Bill?
People stick to a calendarrule where they'll do
it once a year, and I havethat, but then I also have some
guidelines outside of that whenthere are big swings in the market.
I mean, it's always good every oncea year, once every two years, but
then there are times where it's an
opportunity.
And
yeah, and you
gotta take that opportunity.
Yeah.
So that's what rebalancing is forAnyone that wasn't clear on how to
(22:01):
do that really important concept.
Now, you know, my brother Charles, soI've been helping him with his 401k and.
He is very nervous right now, andI know a lot of people are very,
very nervous with what's going on.
They look at their 401k and they'relike, why am I seeing all this red?
I don't know if I should be doing this.
Well, I will start highlevel with the golden rule of
(22:25):
investing, and that is by low.
Right now we're really low and sell high,so if you're still making contributions
to your 401k and you're still working.
That's really a good thing becauseyou are getting more shares and
more money in while the marketis down, while the market is low.
(22:47):
It's really hard to mentally do itsometimes when you see the market
going down, but you are benefiting fromthat if you are making contributions.
So stay the course with makingyour contributions to your 401k and
your retirement account because.
Every period in history,the market has always come
(23:08):
back that you can count on.
I mean, you go through the numbers too.
Over the last 20 years, the market's onlybeen down three out of those 20 years.
And over the last 60 years,because that's my age the, the
market's been down only about 22%of the time or up 78% of the time.
The general rule of thumb is three outof every four years, you're gonna see
(23:31):
the market go up and we don't know wherethis market's gonna end up this year.
We could
end up, up, We have no
idea.
where we're gonna beat the end of the year.
. can feel all doom and gloom,
but years don't always turn out that way.
The down years turn intoup years, so who knows?
Right, and, and we neverknow from year to year.
So all, you know, one of our datapoints, not the only data point, but
(23:51):
one of our data points is how has thestock market performed in the past or
historically, but like you said, thestock market is up way more years.
Then it's down.
So if you start to, I guess, manageyour portfolio or think in terms of,
oh, what if the market goes down?
Well, it will go down.
It's supposed to go down.
That's a normal cycle.
(24:12):
However, I. Know that the market is upway more years than it's down for the,
like you said, for the last 20 years.
It's been down only three years.
But if you go back further the averages,like you said three out of four times,
the stock market is up versus down.
That's pretty powerful and it's a gooddata point that could be helpful to
you as you are mentally trying to getit through your head that, hey, okay.
(24:37):
This is starting to make sense,you know, at least looking at,
historically what's happened.
I can
roughly expect, you know,this to happen in the future.
And one more word to rebalancing.
This was asked in our community as well.
I forget by who, but youcan forward rebalance.
The assets that have taken themost hit are the ones you should
(24:58):
probably be buying in order to buildup that number of shares again.
So you can buy the assets that are most,like, for example, international stocks
are not hit as hard, so you may be wantingto buy US stocks now because they're down
more, and you can rebalance by puttingyour new money into those equities as
opposed to putting money into the lessdepressed, say, international equities.
(25:21):
Does that make sense?
Yeah, it does make sense.
And thank you for giving an example.
I always do better with like specificexamples, so that makes sense.
Now let's not forget about the wisewords of our friend Warren Buffett.
This quote has been shared a milliontimes at least, and this famous quote
is be fearful when others are greedyand be greedy when others are fearful.
(25:45):
I remember, like, I don't know ifthis was part of the same quote,
but he says, when the market's onsale, meaning the, the stocks are
down, the market's down, run out
with wash tubs, not
thimbles.
That's a good one.
I have another one for you too.
When the tide goes out, weknow who's not wearing swimming
That's right.
(26:05):
That's right.
Oh, hey, you, you know when that was,you know when that quote was used a
lot in 2008 because you had I guessyou can call it the big short with real
estate, where it had those bad subprimeloans and they were packaging them up.
That was used a lot.
But Warren Buffet, obviously a very wiseman, probably one of the most successful
and widely known investors ever.
(26:26):
So I love a good Warren Buffet quote,and actually you're a shareholder too,
but I just got the annual shareholderpacket in the mail today with his annual
shareholder's letter, and I always love
to read that
and I'm not even a big reader, butI'll read anything Warren Buffet
writes.
If he puts out a podcast, I'msure you've listened to it.
Oh, for sure,
for sure.
(26:47):
What do you
think about, What do you thinkabout, those market timers out there?
There are some people that said, you knowwhat, January 20th, I'm going to cash.
And you know, I don't know what'scoming, but a storm's coming and
they're feeling pretty smart right now.
I imagine.
But what's the problem with that?
Yeah.
You know, I've had coworkersthat have done that and you know,
(27:07):
maybe they're smarter than me,but you gotta be right two times.
You gotta be, you gotta know when to getout and when to know when to get back in.
You gotta really kind of bewatching it to figure out what
that entry and exit point is.
Now, to me that's a lot of workwithout guaranteeing or knowing,
(27:28):
you know, how it's gonna work out.
But there's always some peoplethat do that, and I don't know
if they're right or wrong.
I don't know if they would share ifthey were wrong, but for that level
of market timing, I'm not braveenough to do something like that.
But we've had.
People post in the group.
I've had people post in othergroups and elsewhere where they're
(27:49):
like, yeah, I got it in January.
I knew it was the right time.
I'm like, I'm
so glad you knew.
Please let me borrow your crystal
ball.
So
One thing you suggest to people is take ascreenshot of your portfolio today or, or
your accounts today, and say, where is it?
Where is it now?
Okay.
And then let's put it under the mattressfor a little while and let's come back in
six months, 12 months, a year or two, andsee what that screenshot looks like today.
(28:13):
Yeah, if I would've done that in2008, which I think screenshots were
available back then, but in 2000, in2008 I probably printed it out, but
it, it was pretty interesting to seehow awful everything was in 2008,
and then I go back a year later.
2009. Great.
And you know what, let me just referencejust how the market bounced back.
(28:37):
So in 2008, do you know how much wewere down in 2008, bill that year?
I think it was in the realm of 45, 50%.
Not quite that much.
Maybe yours was, but it was down 37.
The S&P500 was down 37% in 2008.
Now, the five years after that.
Was tremendous.
(28:58):
It bounced back like a trampoline.
So in 2009, the S&P500 was up 27%.
2010 it was up 15%.
2011 it was only up 2%,but 2012 it was up 16%.
And 2013 it was up 32%.
(29:20):
So I don't know at what point themarket time is would've gotten back in.
But the market was very, very impressiveand very strong for another 10 years.
There was no significant pullbackafter 2008 until like around 20, 22.
So the market has had very strong gainsand, and I usually will tell people,
(29:42):
part of me being able to retire early,I give a lot of credit to the market.
You know, I was mostly investedin stocks, whether index funds or
individual companies, and that made a
difference.
Yeah, I mean, what do youtell the late starters though?
You know, who may not havenecessarily the time to recover.
Hopefully our late starters in theirfifties, unless they're working
(30:05):
until 65, weren't a hundred percentstocks because they may have been
caught with the tide going out andthe swim shorts not on because of the
greed factor in the market, or theneed feeling, the need to take risk.
And how is your risk tolerance feelingtoday versus the beginning of the week?
Well, as we know, that is is a bigissue when you got a late start.
A lot of times we feel likewe need to take more risk.
(30:28):
That is a normal reaction, but Ithink we should normalize the fact
that to reach retirement, it's morelike 10 to 15 years versus the 40
years that we've all been told.
The 40 years is based on companies,employers having pensions.
(30:52):
That required you to work that long.
Now, we've talked about it.
We've had guests on the show, and if youhave, by the time when you wake up and
you start doing things right, normallyif you're a late starter, you're not
at zero, you've been doing something.
Even if it's only paying intothe social security system,
you're closer to Social Security.
(31:13):
But even in your investments,if you've just been doing
the match, that's something.
When you get going, you are going tomove way faster than you ever imagined.
That's what happened to me.
It was not my intention to retire early.
I was just catching up after mydivorce, and this was around 2004,
and it's just crazy every time I thinkabout the fact that it took roughly
(31:37):
12 years for the media move frombeing financially ignorant to starting
to becoming financially literate.
To understanding investing andthe fact that you have to invest
in order to grow your wealth.
You cannot save your way to wealth.
So just sitting in a savingsaccount wasn't gonna do it.
And before I knew it, I had run sofast because I was running away from,
(32:02):
you know, poverty and thinking that Iwas never going to be able to retire.
I was in my forties, my mid tolate forties when I realized, wow.
I'm doing these numbers like the firepeople tell me to do 25 times your annual
expenses, and I was investing my moneymostly using V-V-U-G-A Vanguard Index
(32:23):
Fund, and I was just surprised myself.
But we've talked to so many people.
Bill that it took you about howlong from the time you woke up?
It was till I felt competent.
It took me a year or twotill I really felt competent.
But that was being a type a physicianperson that had to read a bunch of books
in order to feel competent, just like
(32:44):
Hey,
that's what happened.
So, it took me about two yearsto really wake up and start
doing something different.
But from the time you woke up to the timeyou felt con, confident reading those
books or whatever, about how long did
it take you to sort ofreach that financial
independence
Oh, you know, probably think about it.
Yeah, it'd be about six, sevenyears where we reached the milestone
(33:06):
of maybe being 80% financiallyindependent, but huge gains in a
relatively short period of time.
You know, incredible.
I would've liked to think where I would'vebeen if I'd have done it, earlier, but.
but yeah, we can't change that.
Icons and icons, but so, so youmade it pretty quickly as well.
I generally will say, based on thepeople that we've talked to and all the
(33:28):
research that we've done between 10 and.
In 15 years.
So you obviously did it alittle bit sooner than that.
And if you wanna, you know, look atthe retirement, you reach financially
independent typically beforeyou decide you're gonna retire.
But those are just, you know, someexamples of how you can move a
lot faster than you think you can
(33:48):
once you get going.
Yeah.
I mean, This is a goodtime to, have a job, right?
Yeah, I wish I was stillputting money in the
yeah.
I mean the retirees may have ita little harder in that regard,
but hopefully they've planned forthis because it's going to happen.
These kinds of things are gonna happenmultiple times in your lifetime.
I was a bit ignorant of the2008 2009 crisis because we
(34:11):
were paycheck to paycheck.
So when you're not saving, you'renot really paying attention.
I didn't know what my net worth was.
I wasn't really following it.
So I didn't really know from apersonal standpoint, how bad it got.
I saw how bad it got for folks aroundus in the financial community, but
you know, we were just scramblinganyway, so it didn't really matter.
And maybe there are people out there thatfeel that way today but you know, wake up,
(34:35):
realize that this is part of the process.
And as JL Collins says, you know,this is part of the process.
And if you haven't yet,listen to his meditation on a
downward trending stock market.
It's about a nine minute thing.
You can, it'll walk you rightthrough feeling calm again.
And that's probably one of ourbiggest resources to kind of get over
(34:59):
the mental side of this scary time.
We all feel frightened, we allfeel worried, like we don't
have a whole lot of control.
His meditation thing that he did fordownturns in the markets, his gold.
So we'll definitely includethat in the show notes.
But I listened to it.
On these days, and that's is very, andand who doesn't love JL Collins voice.
(35:21):
So that's the plus.
And, and we will havehim on the show again.
You know,
he's refreshing the
simple path to wealth.
Did you know
that?
That's right.
he's
coming on our show andwe'll talk about that.
What are the new, I think he eventalks about Bitcoin in this new one.
But that should probably be part ofeverybody's investor policy statement is
listening to his meditation first thing
before before you, before you do anything.
(35:41):
So, you know, this weekhas been a little rocky.
Next week might be rocky or still.
We'll still be hererecording, catching up to FI.
We'll try and bring you sortof more actual contemporary
podcast at times on Wednesdayswhen things like this do happen.
It's a fun discussion.
You know, I wanna close probably withreading a quote from Jesse Kramer,
(36:03):
one of our prior, prior guests.
'cause he took a bunch of callstoday as a financial advisor from his
clients about, okay, I wanna do this.
And he is like, well.
Let's not do that, andlet me tell you why.
But what he wrote today in ourcommunity, I think is appropriate.
Just wrote these words toconcern an investor this morning.
We don't let fear, panic,or other negative emotions
(36:23):
guide our investing decisions.
We also don't let greed orexuberance guide our decisions.
Good investing is inherentlya non-emotional practice.
It's not easy though.
If it was everyone we knowwould already be doing it.
Times like these especially arewhen our metal is tested, this is
when the millionaires are made,when you can stay the course here
(36:46):
and keep dumping cash on the fire.
I.
That's right.
And what, some tangiblethings that we did.
Any cash that I had sitting in myinvestment accounts where I was
attending to get it invested, I.Brought more shares of my go-to fund,
which is a growth stock index fund.
So I did that.
Today you've been doing somethings with your portfolio.
(37:07):
Tell us anythingactionable that you've been
doing, just as an example.
It doesn't mean everybody has to do it,
but what have you been doing?
Well, there's tax loss harvesting,which is a complex phenomenon, but
fundamentally, and my sister's gonnado this for the first time next week,
so shout out to my sister Kathy.
when, when,
when,
when you've had losses, youcan have the government sharing
those losses because if you sell.
(37:29):
Shares that have seen losses.
You can take $3,000 of thoselosses against your ordinary income
every year and reduce your taxes.
You're basically pushing yourtax burden down the road.
You gotta be a little careful becauseyou can't buy the same thing back again.
Say for example, you sell VTI orV-T-S-A-X, you can't buy that back on
the same day because you wanna stay inthe market and see where it goes with.
(37:51):
If it goes on an upswing, youcan, for example, sell VTI and buy
VOO or the S&P500 because thoseare similar but not identical.
Assets and you have to watch outAlso for something called the wash
sale rule, you can't have done thisfor 30 days prior or 31 days after.
So when you do this, you want to trynot to be buying into what you're
(38:15):
going to be tax loss harvesting.
Read the articles that we post in the shownotes for more details on this, but those
are the fundamentals of how it works.
It's okay to take losses and reduce yourcost basis and let those losses count
against future capital gains or yourordinary income in a tax year to $3,000.
So Bill, this would only be relevant tobrokerage taxable brokerage accounts.
(38:40):
Right.
That's correct.
Okay.
So would it would notbe retirement account.
It would not be an IRA, not a 401k.
This is only brokerage accounts, so keepthat in mind that it only applies to that.
And I will put an some more informationin the show notes because if you
are in that position where youhave a larger brokerage account,
(39:00):
this could be very valuable to you.
So we'll definitely put that in there Now.
Na Bill, I'm super glad that you.
Posted, you know, the, the questionabout the stock market going down today,
but here's exactly what you posted.
So if you're not in our Facebookgroup, join the Facebook group.
Join in on part of the conversation.
And if you're in the Facebook group, I'msure I have a feeling that this post will
(39:22):
continue to get more and more comments.
But your posts here'sexactly what it said.
How is everyone doing withthis current market correction?
Are we headed for a bear market?
Please encourage eachother to stay the course.
Time to buy, not sell.
Consider tax lossharvesting and rebalancing.
(39:44):
And that was a mouthful,but all the comments I.
Would ask questions, what is rebalancing?
What is tax loss harvesting?
And we do this greatexchange of knowledge.
Every single question thatsomeone had, someone else in
the group was able to reply.
A lot of the people that have been on ourpodcast, they are in that group and a lot
(40:08):
of other smart people are in that group.
Now.
Let me throw out a couple of the otherresponses, which are kind of interesting.
So, this you know, resonate.
This kind of represents all thethings that we've been saying,
but buying cheap I like his sayingbuying cheap and stacking deep.
So one of our community members, I'm like,that is the best comment I saw today.
(40:28):
And then another one of our communitymembers says, just holding what we
have and buying more while it's down.
We saw this during covid.
It's not a
loss until you sell.
So we've got some really smart
community members, bill.
Absolutely.
You know, and what's neat tosee is that a simple question
like how are you doing turns in.
(40:50):
Into a stream of comments that ison and on, and that was just today.
So, and, and a lot of helpfulinformation out there for folks
that are like, okay, what do I do?
What is this feature that I can do?
What can I do?
What shouldn't I do?
And this times like this of stress,when you, want a community to
support you in staying the courseand in making appropriate moves,
(41:13):
if any, with your portfolio.
So true, so true.
So we just thought it was worthhaving a conversation today
after the week that we had.
We're not geniuses over here.
We're just everyday people like you.
And it just helps to talk about it.
It helps to maybe put afew data points together.
I. To acknowledge how youfeel and what's going on.
(41:35):
We don't know what nextweek is gonna look like.
We don't know what the rest ofthe year is gonna look like, but.
We know what history says.
We have a lot of information and datapoints that we can reference, and
people like JL Collins has a coolmeditation recording that we all
like to reference, but hopefully thisconversation has been helpful to you.
(41:58):
Come and join us in the Facebook group.
We talk about this all thetime and especially when
something like this is going on.
So, bill this has been
great.
I'm glad
you took your Friday evening to
chat with me about this.
Yeah, I mean, it's
fun.
You know, it, it's, it's.
It's good to try and be contemporary.
You know where we runsix weeks in advance.
We're gonna try and use theseWednesdays to do something like
(42:20):
this where we have a little chitchatabout whatever issue comes up.
I would encourage people to voicetheir questions in the community.
Send us an email at Bill at catchingup to FI.com with your questions.
Send to Jackie at Jackieat catching up to FI.com.
Send us your questions,record a SpeakPipe.
We would love to giveyou a shout out on air.
Yeah, if you wanna know how to leave avoicemail, we love to hear your voice.
(42:41):
I always include that in the show notes.
So leave us a voice message.
If you don't feel like writingor if you want us to share it on
the podcast leave a voicemail.
But we're all in this together.
We love our community.
We're late starters thatwe're not being served.
So we cater to our late starters.
Things look a little bit different,but we can do this, we can do this.
(43:04):
Once you get going, you are gonna beamazed at the progress that you make.
I know through experience, bill knows,through experience and from talking
to a whole lot of other people.
That time horizon, I believe is muchshorter than what we've been told.
It's not 40 years anymore.
It's probably 10 to 15 years fromthe time that you actually wake up.
you can reach financial
(43:25):
independence and thatis what our show is all
about.
And this is just a part of it.
Jackie, have you finishedthat glass of wine yet?
No.
You know,
what, I'm a tea total.
I'm a
really slow drinker.
I'm gonna go get a beer.
You know, we've, we've allearned it this week guys.
We'll talk to you thisSunday on catching up to FI.
I think the reason why you're still kindof levelheaded and I think I am, but , we
get a little nervous like everybody else.
I think the main reason is that,we know stock market history.
We know that, , the marketgoes through normal cycles.
Of course, a lot of people are sayingthat this is different because you
know of the political risk, whichI learned about in my CFP classes.
(00:22):
That's another risk that existswhere policy and politics can.
Pose some risk but regardless of,you know, why, we know that we've
been through all kinds of situations.
, covid, nobody predicted that.
And of course, that was so different thananything else, but here we are today.
(00:43):
so of course we always see theheadline when the market's down.
Oh you shouldn't worryabout it, you'll be fine.
And I'm not saying that's nottrue, but I feel like we should say
stop telling people not to worry.
It is natural and normal forpeople to worry, to be fearful.
I mean, in the moment, likeright now, it is frightening.
(01:05):
That's okay.
Acknowledge the moment.
Now people will worry and feel scared,just like we are, but we put together a
few things that you can do with that fear,
this week has been a little rocky.
Next week might be rocky or still.
We'll still be hererecording, catching up to FI.
(01:27):
We'll try and bring you sortof more actual contemporary
podcast at times on Wednesdayswhen things like this do happen.
It's a fun discussion.
You know, I wanna close probably withreading a quote from Jesse Kramer,
one of our prior, prior guests.
'cause he took a bunch of callstoday as a financial advisor from his
clients about, okay, I wanna do this.
(01:49):
And he is like, well.
Let's not do that, andlet me tell you why.
But what he wrote today in ourcommunity, I think is appropriate.
Just wrote these words toconcern an investor this morning.
We don't let fear, panic,or other negative emotions
guide our investing decisions.
We also don't let greed orexuberance guide our decisions.
Good investing is inherentlya non-emotional practice.
(02:11):
It's not easy though.
If it was everyone we knowwould already be doing it.
Times like these especially arewhen our metal is tested, this is
when the millionaires are made,when you can stay the course here
and keep dumping cash on the fire.
(04:04):
Hello and welcome backto Catching Up to FI.
It's Friday, April 4th.
Oh my goodness.
What,
Ooh Lord, we survive.
Bill, I had to break out the wine.
Are you kidding me?
This?
(04:24):
Ooh Lord.
I'm celebrating this
week being
over.
Are you kidding me?
Is it over?
That's the question, right?
That it.
Well, this week is, we needthis, this is Friday, April
the fourth, like you mentioned.
So I need a pause.
I'm gonna enjoy these next two dayswhere the market is not open, you know?
Yeah, we didn't trip any circuitbreakers, but it looks like we came close.
(04:48):
Yeah.
So let me get a glass ofmy wine before we have this
conversation.
we haven't had a week like this since2020 or something close to that.
Yeah, that was I believe from January,2020 to April, 2020 was the Covid Scare.
And we had a big drop and probablyprior to that bill 2008, that was
pretty awful because honestly, youknow, I remember 2008 and that's when
(05:13):
I started most of my investing, but.
What was different was that therewere multiple markets going down.
The real estate market, the stockmarket, like the bond market,
every single market went down.
Right now it's prettymuch the stock market.
So far the real estate marketis still, pretty strong.
So we made it, we madeit out of this week.
(05:33):
We'll have to see what next week's brings.
But we had
I
was a
little distracted because I, youwere visiting me at home and we,
we were having lunch together again
At a cool Thai restaurant.
What was the name of that restaurant?
Let's give 'em a shout
out.
Took,
took,
took.
took.
took.
I thought it was a cute name.
It was right off of the interstate.
So I visited my sister for her birthday.
Happy Birthday Gwen.
(05:54):
We celebrated in Atlanta at a, Itold you about this really cool
place called the red phone booth.
Okay.
Yeah, that's right.
It's a cigar bar.
You gave my wife a cigar tocelebrate getting, getting through
a healthcare journey that we'vebeen on over the last year.
Yeah, she deserved it.
But yeah, on my way backyou're like, well, if the time
works out, you know, stop by.
And we got a great Thaiplace that's right off
(06:15):
the interstate, so I'm like, why not?
I gotta have lunch
somewhere.
Well, what's interestingis, you know, if we hadn't
looked at the market, lifewouldn't have changed.
Here we are having lunch, but youand I being finance, you know, geeks.
You may have taken a peak andwe're like, oh my goodness, the
tip just got more expensive.
Or something like that.
but but the world didn't change.
It didn't fall apart.
Finances were falling.
(06:36):
There was red in the streets.
But , I don't feel any different todaythan I did at the beginning of the week.
Quite honestly.
I.
Yeah.
It was a pretty e exciting week.
You know, probably more to the badfor most people, but yeah, so I think
the reason why you're still kind oflevelheaded and I think I am, but , we
get a little nervous like everybody else.
I think the main reason is that,we know stock market history.
(06:57):
We know that, , the marketgoes through normal cycles.
Of course, a lot of people are sayingthat this is different because you
know of the political risk, whichI learned about in my CFP classes.
That's another risk that existswhere policy and politics can.
Pose some risk but regardless of,you know, why, we know that we've
(07:19):
been through all kinds of situations.
, covid, nobody predicted that.
And of course, that was so different than
anything else, but here we are today.
Yeah, I mean, tariffs are
just one
thing.
We were due for a correction.
Hell, we've probably beendue for another bear market.
It's been five years, we're overdue.
(07:40):
So some of this is very predictablebecause it happens, A correction
happens once a year, right?
Something like that.
And we haven't had a correctionin a couple of years.
And a correction, just to define it,is a 10% drop from peak to trough.
And so we can define it for other folks.
A bear market is a 20% drop from peakto trough, and we're not quite in the
bear market in the total US NASDAQ is.
(08:00):
It's 22% down from February 19th,which was our most recent peak.
But we're close and itcould, come on next week.
We don't know what's gonna happen.
We can't predict nothing.
My crystal ball is totally cloudy.
Right.
Mine is cloudy.
So anyone that with confidence issaying, it's gonna last this long,
it's not gonna happen anytime.
So, you know, those areopinions that, everybody has.
(08:23):
We, the the right answer is we don't know.
There are certain things thatwe don't have control over.
So you can either focus on thethings that you don't have control
over and be very, very frustrated.
Or you could say, you know, what,what things do we have control over?
Does knowing historically how the stockmarket performs matter and does it help?
(08:44):
So that's what our goal is today.
We went through a rough time this week.
This is the first week of April and.
The reason why everyone's talkingabout it is because of the
rapid drop in the stock market.
And what does it bill two days in a row.
Thursday and
Friday we were down more
than 5%.
(09:05):
Yeah, let's go over the numbers here.
we
got,
so the S&P500 was down 6% on Friday.
It's down 7% for the week, 14% year todate, and then down 1% for the year.
That is the last 12 months.
So we've lost an entire yearof gains that are wiped out.
Right.
Yeah.
As of Friday, April the fourth.
And I think we'll allbe remembering this day.
(09:27):
It'll go down in history.
Right.
So so yeah, so those arethe interesting numbers.
And many of you may be familiarwith the most common indexes, but
you know, let's just mention them.
So typically if you're listeningto C-B-C-C-N-B-C or something like
that, they talk about the dao.
The DAO is the 30 really big.
Companies that's beenaround for a long time.
Okay.
I generally don't like to use that onebill because it's only 30 companies.
(09:49):
I usually like to reference the S&P500,which is the 500 largest US companies.
So when you just mentioned,, down on, 6% on Friday and so
forth, that was the S&P500.
And the other common onethat you mentioned was the
nasdaq.
So what does the NASDAQ represent, bill?
That's the 2000 largestcompanies on that exchange.
(10:10):
And it's tech heavy, whichis why it's down more.
That's the only thing you needknow is it's gonna have the
magnificent seven in there.
And when tech falls.
That falls greater.
Yeah.
Yeah.
So, so when we mention those, those arejust the most commonly referenced indexes.
Okay.
So, for my, my numbers and my littleold portfolio, so I, I've been retired
(10:32):
for six years, so that's importantbecause, you know, you, you made a
great post in our Facebook group today.
and and we'll mention some of the feedbackthat you got in our Facebook group, and
if you are not a part of a Facebook group,just go to catching up to fi on Facebook.
It's very active and we had a verygood, productive exchange on that post.
So thank you for posting that.
But, but here's what my numbers look like.
(10:53):
Bill.
You know, I'm pretty transparent, so I'lljust use myself as an example, right?
So my portfolio at the beginning ofthe year was roughly $1.8 million.
Those are my investible assets.
I've lost 20% since thebeginning of the year.
So roughly that's about $360,000.
Ouch.
Right?
That hurts.
But I haven't lost anythingbecause I haven't sold anything.
(11:17):
Right.
So.
I've been retired, like I said, forsix years, and most of my investible
assets are in a growth index fund.
I've talked about it before.
But then I do have an individual stockportfolio, but I always like to stress
that probably most people don't need tobe having an individual stock portfolio.
(11:38):
That's just something I enjoy doing.
I analyze great companies, butthat is a part of my situation.
So, if I had to break it up,I would say 80% is in the
growth, stock and index fund.
About 15% is in my individualstock portfolio, and the other
5% is in cash because again, I'mretired, so I need to have money to
(12:00):
live on, so I can't be too risky.
Okay.
So my growth fund has been down.
A bit more than that.
V-T-S-A-X-A total stockmarket fund or the S&P500.
So if so, let me give you someother numbers that I have.
So, okay, so my year to date, my year,the S&P500, year to date is down 14%.
(12:23):
Year to date my investibleassets is down 8%.
And over the past year.
The S&P500 was down 1%.
We just knocked out all the gates.
But my individual my investibleassets altogether was up about 7%.
So fine.
Happy with that.
(12:43):
But again, I've got VUG and then I'vegot my individual stock portfolio.
So, but that's just one example.
That's
how my numbers shake out.
What, what does yours
look like, bill?
Well, I'm in the
75 25
portfolio, roughly 20% bonds, 5%cash, and 75% equities divided into
an 80 20 between us and international.
(13:05):
And I'm down 7% year to date and I'mup over about 8% over the last year.
So a little bit better than youbecause I'm more conservative, but
not as much as I might've thought.
But we just ran thosenumbers and it is what it is.
If you look at, depending on yourportfolio and these percentages,
it could be hundreds of thousandsof dollars that disappear.
But if you don't sell, you still havethe same number of shares and you're
(13:29):
able to buy shares at a discount now.
So Yahoo.
Yeah, e exactly.
So I knew that yours would be doinga little bit better because you are
a little bit more conservative whereyou plus international has been
doing well, so that's helped you too.
Right.
And then the, you have bonds,so obviously they are not gonna
be down quite as much as stocks.
(13:50):
so so for my single stock portfoliothough, just back to that people
are always interested, youknow, what are you invested in
and you know how they're doing.
Well, I could tell you most ofmy individual stock portfolio, my
individual stocks most of them are red.
Most of them are down over the lastweek, some of them down year to date.
But however, there's aglimmer of hope here.
Bill.
There's a glimmer of hope andI did have four stocks that.
(14:14):
Are up year to date, do You know?
You kind of know what my portfolio is.
Oh, you know what?
we share a
stock
that is up year
to date and that is Berkshire
Hathaway.
Yeah, we do.
We share that one.
That's my only individual stock,but it functions as a mutual
fund, so I don't really count it.
Right.
And that is my largest holding.
So that year to date is up.
9%. And let's see, then McDonald's.
(14:38):
I have McDonald's that's up 5%.
Kroger.
Is up 11%.
And then Northup Grumman, whichis a defense company, is up 5%.
So I got some little glimmer ofhope there, but again, I don't think
that everyone needs an individualstock portfolio unless you have the
inclination in the interest like I do.
(14:58):
But it was kind of nice tosee a little bit of ray of
sunshine and all this
cloudiness and all
the red,
so.
Yeah, I mean, peopleare talking about this.
We
had over 140 comments inthat little post that I made.
You know, it's certainlyon people's top of mind.
It's been a while since we've been here.
We need to remind everybody toacknowledge your emotions first, right?
(15:19):
'cause you're you're gonna havethem, but you can't necessarily
act on those emotions.
Yeah, so of course we always seethe headline when the market's down.
Oh you shouldn't worryabout it, you'll be fine.
And I'm not saying that's nottrue, but I feel like we should say
stop telling people not to worry.
It is natural and normal forpeople to worry, to be fearful.
(15:41):
I mean, in the moment, likeright now, it is frightening.
That's okay.
Acknowledge the moment.
Now people will worry and feelscared, just like we are, but we
put together a few things thatyou can do with that fear, right.
To try to turn it around.
So one of the things Imentioned was like in 2008.
(16:05):
I was investing and Iremember how bad it was.
And a lot of you that arelistening, you lived through 2008.
Well, I feel like it was almostfive times worse in 2008.
And one of the things that I didmentally is mentally I bottled up
how I felt in 2008, because when Ithink about after 2008 what happened?
(16:28):
It was pretty darn good, and Ithink that's part of why I was
even able to retire early, thatthat helped grow my assets.
And so if you can bottle up how youfeel today and remember the next
correction and what happens afterthat correction or after that market
drop
it could serve you well going
forward,
(16:50):
Yeah, I mean the first thing you gotta
do, just like being alate starter is pause.
Take a pause and then plan.
Well, you gotta have an investorpolicy statement, right?
That tells you what you're goingto do in these times of stress.
So you don't have to wonder, you don'thave to make it up as you're going along.
Hopefully you have something writtendown on one page of the, when the
(17:14):
market crashes, 'cause it's going to.
A crash is 30%, we're close to 20%.
So we're edging towards the bear market.
What am I going to do at 10, 20, 30%?
Am I going to rebalance?
Am I gonna do some other of these thingsthat we're gonna talk about today?
So the plan needs to be made beforethe events happen, is what I would say.
(17:35):
And don't let youremotions run away from you.
If that does happen and youdon't have a plan, it's time to.
Pause and put one together.
And if you're gonna doanything, don't do anything.
Just stand there.
Yeah.
And Bill I'm curious, so withyour investor policy statement,
are you following what you put in
that
statement right now?
(17:56):
Yeah.
Assuming we crossed the 20% thresholdinto our bear market on rebalancing.
I'm taking outta bonds and puttinginto stocks just to, you know, buy
what, it may not be the bottom.
Who knows where the bottom'sgonna be, or we're cloudy.
But at 20% I rebalance, and if itgoes to 30%, I'll rebalance again.
Okay, so we actually did havea question about rebalancing.
(18:19):
So we'll get to that toward the end.
But you can explain what rebalancingis so that, everybody knows what that
actually means on the execution side.
So you know, I do have a bias alongthe lines of health savings accounts.
So I hear all the timethat people say, oh.
I didn't even know Icould invest in my HSA.
I've got $20,000 sitting in there.
(18:39):
So honestly, now's a prettygood time to deploy that.
But if your HSA is set up where you wantit for a long-term vehicle and you wanna
use it in retirement where it makessense to invest it now would not be.
A bad time and I started investing inmine in 2008 and that's why it has grown
(19:01):
so much to where it's over $200,000.
Even with the market, drop and everything.
This week it's stillover $200,000 in my HSA.
So go check your old HSAs if you gotany old HSA that's just sitting there
and you wanna use it, for long term
and you think you wanna invest it,
Now would be a great
time.
Yeah, I mean this, it's, it's agood time to talk about rebalancing
(19:24):
too, because every aspectyour portfolio has.
Has sort of a, a risk profile.
And for me, an HSA is a high risk profile.
It's all a hundredpercent equity index fund.
I pick one of them and, and actuallyin my case, it's an 80 20 of my
equity between US and international,but it's a hundred percent equities.
And the same is true in my RothIRA, but across all the individual.
(19:47):
Funds that I have, whether it be aRoth 401k or IRA, each of them has
their own kind of risk portfolio, buta across the entire portfolio, it's
a 75 25, and you can, while you canhave an individual risk allotment
in your HSA or your Roth IRA, acrossthe portfolio is where you rebalance.
(20:09):
And you know, rebalancingis often bonds to stocks.
It's a good idea to hold bonds inyour tax efficient pre-tax portfolio
so that it's easy to rebalancewithout any tax consequences.
It's harder to do in an after taxbrokerage account, for example.
You can do it, but you'regonna see capital gains.
(20:30):
It's easier to rebalance withinyour tax protected accounts.
That's a general look at rebalancing.
Does that help Jackie?
Yeah, because one of our communitymembers was like, I'm not sure what
rebalancing actually looks like.
So you gave a good explanation.
But I think also a really good scenariois like in your 401k or your employer
sponsored plan, whether it's a, thriftsavings plan, 401k, 4 0 3 B, and actually
(20:54):
we had a very smart community member that.
Replied to the comment andI thought did a great job.
But basically if you're doing it in your401k or something like that, and your
goal is to be 80% stocks, 20% bonds,well, if stocks are sucking really bad
like they are now, well now your bondsmay represent 30% and your stock is 70%.
(21:18):
So how do you get that?
In balance.
So rebalancing says that you wouldgo in and say, let me switch,
make sure or let me get this backto the allocation that I want.
I need it back to the 80%stocks, the 20% bonds.
Some people will,
how, how frequent would,would someone do something
(21:39):
like this
Bill?
People stick to a calendarrule where they'll do
it once a year, and I havethat, but then I also have some
guidelines outside of that whenthere are big swings in the market.
I mean, it's always good every oncea year, once every two years, but
then there are times where it's an
opportunity.
And
yeah, and you
gotta take that opportunity.
Yeah.
So that's what rebalancing is forAnyone that wasn't clear on how to
(22:01):
do that really important concept.
Now, you know, my brother Charles, soI've been helping him with his 401k and.
He is very nervous right now, andI know a lot of people are very,
very nervous with what's going on.
They look at their 401k and they'relike, why am I seeing all this red?
I don't know if I should be doing this.
Well, I will start highlevel with the golden rule of
(22:25):
investing, and that is by low.
Right now we're really low and sell high,so if you're still making contributions
to your 401k and you're still working.
That's really a good thing becauseyou are getting more shares and
more money in while the marketis down, while the market is low.
(22:47):
It's really hard to mentally do itsometimes when you see the market
going down, but you are benefiting fromthat if you are making contributions.
So stay the course with makingyour contributions to your 401k and
your retirement account because.
Every period in history,the market has always come
(23:08):
back that you can count on.
I mean, you go through the numbers too.
Over the last 20 years, the market's onlybeen down three out of those 20 years.
And over the last 60 years,because that's my age the, the
market's been down only about 22%of the time or up 78% of the time.
The general rule of thumb is three outof every four years, you're gonna see
(23:31):
the market go up and we don't know wherethis market's gonna end up this year.
We could
end up, up, We have no
idea.
where we're gonna beat the end of the year.
. can feel all doom and gloom,
but years don't always turn out that way.
The down years turn intoup years, so who knows?
Right, and, and we neverknow from year to year.
So all, you know, one of our datapoints, not the only data point, but
(23:51):
one of our data points is how has thestock market performed in the past or
historically, but like you said, thestock market is up way more years.
Then it's down.
So if you start to, I guess, manageyour portfolio or think in terms of,
oh, what if the market goes down?
Well, it will go down.
It's supposed to go down.
That's a normal cycle.
(24:12):
However, I. Know that the market is upway more years than it's down for the,
like you said, for the last 20 years.
It's been down only three years.
But if you go back further the averages,like you said three out of four times,
the stock market is up versus down.
That's pretty powerful and it's a gooddata point that could be helpful to
you as you are mentally trying to getit through your head that, hey, okay.
(24:37):
This is starting to make sense,you know, at least looking at,
historically what's happened.
I can
roughly expect, you know,this to happen in the future.
And one more word to rebalancing.
This was asked in our community as well.
I forget by who, but youcan forward rebalance.
The assets that have taken themost hit are the ones you should
(24:58):
probably be buying in order to buildup that number of shares again.
So you can buy the assets that are most,like, for example, international stocks
are not hit as hard, so you may be wantingto buy US stocks now because they're down
more, and you can rebalance by puttingyour new money into those equities as
opposed to putting money into the lessdepressed, say, international equities.
(25:21):
Does that make sense?
Yeah, it does make sense.
And thank you for giving an example.
I always do better with like specificexamples, so that makes sense.
Now let's not forget about the wisewords of our friend Warren Buffett.
This quote has been shared a milliontimes at least, and this famous quote
is be fearful when others are greedyand be greedy when others are fearful.
(25:45):
I remember, like, I don't know ifthis was part of the same quote,
but he says, when the market's onsale, meaning the, the stocks are
down, the market's down, run out
with wash tubs, not
thimbles.
That's a good one.
I have another one for you too.
When the tide goes out, weknow who's not wearing swimming
That's right.
(26:05):
That's right.
Oh, hey, you, you know when that was,you know when that quote was used a
lot in 2008 because you had I guessyou can call it the big short with real
estate, where it had those bad subprimeloans and they were packaging them up.
That was used a lot.
But Warren Buffet, obviously a very wiseman, probably one of the most successful
and widely known investors ever.
(26:26):
So I love a good Warren Buffet quote,and actually you're a shareholder too,
but I just got the annual shareholderpacket in the mail today with his annual
shareholder's letter, and I always love
to read that
and I'm not even a big reader, butI'll read anything Warren Buffet
writes.
If he puts out a podcast, I'msure you've listened to it.
Oh, for sure,
for sure.
(26:47):
What do you
think about, What do you thinkabout, those market timers out there?
There are some people that said, you knowwhat, January 20th, I'm going to cash.
And you know, I don't know what'scoming, but a storm's coming and
they're feeling pretty smart right now.
I imagine.
But what's the problem with that?
Yeah.
You know, I've had coworkersthat have done that and you know,
(27:07):
maybe they're smarter than me,but you gotta be right two times.
You gotta be, you gotta know when to getout and when to know when to get back in.
You gotta really kind of bewatching it to figure out what
that entry and exit point is.
Now, to me that's a lot of workwithout guaranteeing or knowing,
(27:28):
you know, how it's gonna work out.
But there's always some peoplethat do that, and I don't know
if they're right or wrong.
I don't know if they would share ifthey were wrong, but for that level
of market timing, I'm not braveenough to do something like that.
But we've had.
People post in the group.
I've had people post in othergroups and elsewhere where they're
(27:49):
like, yeah, I got it in January.
I knew it was the right time.
I'm like, I'm
so glad you knew.
Please let me borrow your crystal
ball.
So
One thing you suggest to people is take ascreenshot of your portfolio today or, or
your accounts today, and say, where is it?
Where is it now?
Okay.
And then let's put it under the mattressfor a little while and let's come back in
six months, 12 months, a year or two, andsee what that screenshot looks like today.
(28:13):
Yeah, if I would've done that in2008, which I think screenshots were
available back then, but in 2000, in2008 I probably printed it out, but
it, it was pretty interesting to seehow awful everything was in 2008,
and then I go back a year later.
2009. Great.
And you know what, let me just referencejust how the market bounced back.
(28:37):
So in 2008, do you know how much wewere down in 2008, bill that year?
I think it was in the realm of 45, 50%.
Not quite that much.
Maybe yours was, but it was down 37.
The S&P500 was down 37% in 2008.
Now, the five years after that.
Was tremendous.
(28:58):
It bounced back like a trampoline.
So in 2009, the S&P500 was up 27%.
2010 it was up 15%.
2011 it was only up 2%,but 2012 it was up 16%.
And 2013 it was up 32%.
(29:20):
So I don't know at what point themarket time is would've gotten back in.
But the market was very, very impressiveand very strong for another 10 years.
There was no significant pullbackafter 2008 until like around 20, 22.
So the market has had very strong gainsand, and I usually will tell people,
(29:42):
part of me being able to retire early,I give a lot of credit to the market.
You know, I was mostly investedin stocks, whether index funds or
individual companies, and that made a
difference.
Yeah, I mean, what do youtell the late starters though?
You know, who may not havenecessarily the time to recover.
Hopefully our late starters in theirfifties, unless they're working
(30:05):
until 65, weren't a hundred percentstocks because they may have been
caught with the tide going out andthe swim shorts not on because of the
greed factor in the market, or theneed feeling, the need to take risk.
And how is your risk tolerance feelingtoday versus the beginning of the week?
Well, as we know, that is is a bigissue when you got a late start.
A lot of times we feel likewe need to take more risk.
(30:28):
That is a normal reaction, but Ithink we should normalize the fact
that to reach retirement, it's morelike 10 to 15 years versus the 40
years that we've all been told.
The 40 years is based on companies,employers having pensions.
(30:52):
That required you to work that long.
Now, we've talked about it.
We've had guests on the show, and if youhave, by the time when you wake up and
you start doing things right, normallyif you're a late starter, you're not
at zero, you've been doing something.
Even if it's only paying intothe social security system,
you're closer to Social Security.
(31:13):
But even in your investments,if you've just been doing
the match, that's something.
When you get going, you are going tomove way faster than you ever imagined.
That's what happened to me.
It was not my intention to retire early.
I was just catching up after mydivorce, and this was around 2004,
and it's just crazy every time I thinkabout the fact that it took roughly
(31:37):
12 years for the media move frombeing financially ignorant to starting
to becoming financially literate.
To understanding investing andthe fact that you have to invest
in order to grow your wealth.
You cannot save your way to wealth.
So just sitting in a savingsaccount wasn't gonna do it.
And before I knew it, I had run sofast because I was running away from,
(32:02):
you know, poverty and thinking that Iwas never going to be able to retire.
I was in my forties, my mid tolate forties when I realized, wow.
I'm doing these numbers like the firepeople tell me to do 25 times your annual
expenses, and I was investing my moneymostly using V-V-U-G-A Vanguard Index
(32:23):
Fund, and I was just surprised myself.
But we've talked to so many people.
Bill that it took you about howlong from the time you woke up?
It was till I felt competent.
It took me a year or twotill I really felt competent.
But that was being a type a physicianperson that had to read a bunch of books
in order to feel competent, just like
(32:44):
Hey,
that's what happened.
So, it took me about two yearsto really wake up and start
doing something different.
But from the time you woke up to the timeyou felt con, confident reading those
books or whatever, about how long did
it take you to sort ofreach that financial
independence
Oh, you know, probably think about it.
Yeah, it'd be about six, sevenyears where we reached the milestone
(33:06):
of maybe being 80% financiallyindependent, but huge gains in a
relatively short period of time.
You know, incredible.
I would've liked to think where I would'vebeen if I'd have done it, earlier, but.
but yeah, we can't change that.
Icons and icons, but so, so youmade it pretty quickly as well.
I generally will say, based on thepeople that we've talked to and all the
(33:28):
research that we've done between 10 and.
In 15 years.
So you obviously did it alittle bit sooner than that.
And if you wanna, you know, look atthe retirement, you reach financially
independent typically beforeyou decide you're gonna retire.
But those are just, you know, someexamples of how you can move a
lot faster than you think you can
(33:48):
once you get going.
Yeah.
I mean, This is a goodtime to, have a job, right?
Yeah, I wish I was stillputting money in the
yeah.
I mean the retirees may have ita little harder in that regard,
but hopefully they've planned forthis because it's going to happen.
These kinds of things are gonna happenmultiple times in your lifetime.
I was a bit ignorant of the2008 2009 crisis because we
(34:11):
were paycheck to paycheck.
So when you're not saving, you'renot really paying attention.
I didn't know what my net worth was.
I wasn't really following it.
So I didn't really know from apersonal standpoint, how bad it got.
I saw how bad it got for folks aroundus in the financial community, but
you know, we were just scramblinganyway, so it didn't really matter.
And maybe there are people out there thatfeel that way today but you know, wake up,
(34:35):
realize that this is part of the process.
And as JL Collins says, you know,this is part of the process.
And if you haven't yet,listen to his meditation on a
downward trending stock market.
It's about a nine minute thing.
You can, it'll walk you rightthrough feeling calm again.
And that's probably one of ourbiggest resources to kind of get over
(34:59):
the mental side of this scary time.
We all feel frightened, we allfeel worried, like we don't
have a whole lot of control.
His meditation thing that he did fordownturns in the markets, his gold.
So we'll definitely includethat in the show notes.
But I listened to it.
On these days, and that's is very, andand who doesn't love JL Collins voice.
(35:21):
So that's the plus.
And, and we will havehim on the show again.
You know,
he's refreshing the
simple path to wealth.
Did you know
that?
That's right.
he's
coming on our show andwe'll talk about that.
What are the new, I think he eventalks about Bitcoin in this new one.
But that should probably be part ofeverybody's investor policy statement is
listening to his meditation first thing
before before you, before you do anything.
(35:41):
So, you know, this weekhas been a little rocky.
Next week might be rocky or still.
We'll still be hererecording, catching up to FI.
We'll try and bring you sortof more actual contemporary
podcast at times on Wednesdayswhen things like this do happen.
It's a fun discussion.
You know, I wanna close probably withreading a quote from Jesse Kramer,
(36:03):
one of our prior, prior guests.
'cause he took a bunch of callstoday as a financial advisor from his
clients about, okay, I wanna do this.
And he is like, well.
Let's not do that, andlet me tell you why.
But what he wrote today in ourcommunity, I think is appropriate.
Just wrote these words toconcern an investor this morning.
We don't let fear, panic,or other negative emotions
(36:23):
guide our investing decisions.
We also don't let greed orexuberance guide our decisions.
Good investing is inherentlya non-emotional practice.
It's not easy though.
If it was everyone we knowwould already be doing it.
Times like these especially arewhen our metal is tested, this is
when the millionaires are made,when you can stay the course here
(36:46):
and keep dumping cash on the fire.
I.
That's right.
And what, some tangiblethings that we did.
Any cash that I had sitting in myinvestment accounts where I was
attending to get it invested, I.Brought more shares of my go-to fund,
which is a growth stock index fund.
So I did that.
Today you've been doing somethings with your portfolio.
(37:07):
Tell us anythingactionable that you've been
doing, just as an example.
It doesn't mean everybody has to do it,
but what have you been doing?
Well, there's tax loss harvesting,which is a complex phenomenon, but
fundamentally, and my sister's gonnado this for the first time next week,
so shout out to my sister Kathy.
when, when,
when,
when you've had losses, youcan have the government sharing
those losses because if you sell.
(37:29):
Shares that have seen losses.
You can take $3,000 of thoselosses against your ordinary income
every year and reduce your taxes.
You're basically pushing yourtax burden down the road.
You gotta be a little careful becauseyou can't buy the same thing back again.
Say for example, you sell VTI orV-T-S-A-X, you can't buy that back on
the same day because you wanna stay inthe market and see where it goes with.
(37:51):
If it goes on an upswing, youcan, for example, sell VTI and buy
VOO or the S&P500 because thoseare similar but not identical.
Assets and you have to watch outAlso for something called the wash
sale rule, you can't have done thisfor 30 days prior or 31 days after.
So when you do this, you want to trynot to be buying into what you're
(38:15):
going to be tax loss harvesting.
Read the articles that we post in the shownotes for more details on this, but those
are the fundamentals of how it works.
It's okay to take losses and reduce yourcost basis and let those losses count
against future capital gains or yourordinary income in a tax year to $3,000.
So Bill, this would only be relevant tobrokerage taxable brokerage accounts.
(38:40):
Right.
That's correct.
Okay.
So would it would notbe retirement account.
It would not be an IRA, not a 401k.
This is only brokerage accounts, so keepthat in mind that it only applies to that.
And I will put an some more informationin the show notes because if you
are in that position where youhave a larger brokerage account,
(39:00):
this could be very valuable to you.
So we'll definitely put that in there Now.
Na Bill, I'm super glad that you.
Posted, you know, the, the questionabout the stock market going down today,
but here's exactly what you posted.
So if you're not in our Facebookgroup, join the Facebook group.
Join in on part of the conversation.
And if you're in the Facebook group, I'msure I have a feeling that this post will
(39:22):
continue to get more and more comments.
But your posts here'sexactly what it said.
How is everyone doing withthis current market correction?
Are we headed for a bear market?
Please encourage eachother to stay the course.
Time to buy, not sell.
Consider tax lossharvesting and rebalancing.
(39:44):
And that was a mouthful,but all the comments I.
Would ask questions, what is rebalancing?
What is tax loss harvesting?
And we do this greatexchange of knowledge.
Every single question thatsomeone had, someone else in
the group was able to reply.
A lot of the people that have been on ourpodcast, they are in that group and a lot
(40:08):
of other smart people are in that group.
Now.
Let me throw out a couple of the otherresponses, which are kind of interesting.
So, this you know, resonate.
This kind of represents all thethings that we've been saying,
but buying cheap I like his sayingbuying cheap and stacking deep.
So one of our community members, I'm like,that is the best comment I saw today.
(40:28):
And then another one of our communitymembers says, just holding what we
have and buying more while it's down.
We saw this during covid.
It's not a
loss until you sell.
So we've got some really smart
community members, bill.
Absolutely.
You know, and what's neat tosee is that a simple question
like how are you doing turns in.
(40:50):
Into a stream of comments that ison and on, and that was just today.
So, and, and a lot of helpfulinformation out there for folks
that are like, okay, what do I do?
What is this feature that I can do?
What can I do?
What shouldn't I do?
And this times like this of stress,when you, want a community to
support you in staying the courseand in making appropriate moves,
(41:13):
if any, with your portfolio.
So true, so true.
So we just thought it was worthhaving a conversation today
after the week that we had.
We're not geniuses over here.
We're just everyday people like you.
And it just helps to talk about it.
It helps to maybe put afew data points together.
I. To acknowledge how youfeel and what's going on.
(41:35):
We don't know what nextweek is gonna look like.
We don't know what the rest ofthe year is gonna look like, but.
We know what history says.
We have a lot of information and datapoints that we can reference, and
people like JL Collins has a coolmeditation recording that we all
like to reference, but hopefully thisconversation has been helpful to you.
(41:58):
Come and join us in the Facebook group.
We talk about this all thetime and especially when
something like this is going on.
So, bill this has been
great.
I'm glad
you took your Friday evening to
chat with me about this.
Yeah, I mean, it's
fun.
You know, it, it's, it's.
It's good to try and be contemporary.
You know where we runsix weeks in advance.
We're gonna try and use theseWednesdays to do something like
(42:20):
this where we have a little chitchatabout whatever issue comes up.
I would encourage people to voicetheir questions in the community.
Send us an email at Bill at catchingup to FI.com with your questions.
Send to Jackie at Jackieat catching up to FI.com.
Send us your questions,record a SpeakPipe.
We would love to giveyou a shout out on air.
Yeah, if you wanna know how to leave avoicemail, we love to hear your voice.
(42:41):
I always include that in the show notes.
So leave us a voice message.
If you don't feel like writingor if you want us to share it on
the podcast leave a voicemail.
But we're all in this together.
We love our community.
We're late starters thatwe're not being served.
So we cater to our late starters.
Things look a little bit different,but we can do this, we can do this.
(43:04):
Once you get going, you are gonna beamazed at the progress that you make.
I know through experience, bill knows,through experience and from talking
to a whole lot of other people.
That time horizon, I believe is muchshorter than what we've been told.
It's not 40 years anymore.
It's probably 10 to 15 years fromthe time that you actually wake up.
you can reach financial
(43:25):
independence and thatis what our show is all
about.
And this is just a part of it.
Jackie, have you finishedthat glass of wine yet?
No.
You know,
what, I'm a tea total.
I'm a
really slow drinker.
I'm gonna go get a beer.
You know, we've, we've allearned it this week guys.
We'll talk to you thisSunday on catching up to FI.
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