EP. 142 More Knowledge, More Wealth: AM 590 Radio Show

Transcript:

Announcer:

This is More Knowledge, More Wealth, with your host, Gabriel Shahin. Gabriel is a certified financial planner and a registered investment advisor at Falcon Wealth Planning. This show is not intended to provide personalized investment advice through this broadcast and does not represent that the services or securities discussed, are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast, in the process of making a full informed investment decision. More Knowledge, More Wealth, on AM 590 The Answer. Now here's your host, Gabriel Shahin.

Gabriel Shahin:

Good afternoon. This is Gabriel Shahin, certified financial planner, and your host of More Knowledge, More Wealth! Here on every weekend talking about all important topics of personal finance. Our goal is to give you the knowledge you need to increase your wealth. Now you can always reach out to myself or any one of our colleagues here at Falcon Wealth Planning.

Our phone number is 855 963 2526. That's 855 96 Falcon, like the bird. We can help relate this show to your specific situation. Now I'm a principal of Falcon Wealth Planning. We are a fee only registered investment advisory firm. We also do investment management as well, but we really specialize in comprehensive planning, folks.

That goes over where you are today, what retirement looks like. Talks about taxes, investments, insurance, estate planning. Folks, you name it. Anything that involves a dollar sign, give us a call. We'd love to help. Our phone number is 855 963 2526. That's 855 96 Falcon, like the bird. Or visit our website at falconwealthplanning.com. That's falconwp.com for short.

Now folks, the stock market is having fun this quarter, this year. You are looking at, as we spoke about last week, you are about 20% down, potentially as much as 30% down with the tech stocks, NASDAQ. And it is all over the place. People are scared of inflation, people are scared of shortages, people are scared of interest rates. People are scared of war.

People are just scared. The consumer sentiment right now is low. People are worried. They're not as confident as they were a year ago. And it makes sense if your million dollars is now 800,000. You have to understand that the way you invest is crucial on the long term.

We had a client, he was 40 years old and he had 1.5 million in Netflix, talking about how great things were in December of 2021. Well, he doesn't have that 1.2 or $4 million anymore, he has close to 400,000. When you live by taking risk in your investment and future accounts, you die by the risk as well.

Everything has to be risk versus reward. I joke about it all the time when my wife says, "Hey, we should bring the kids to go see the family in Arizona. And it's only a day trip, a flight." I said, "Hun, that is a very high risk for very low reward. We're going there for a purpose.

If they were to go and see the family, they're going to be tired, giving us a hard time and we may not achieve what we want to achieve with them being there." This is a good example of what we're talking about. And the same thing with the stock market, putting all your eggs in one company is high risk and the reward may not be there.

So much so where there was a Nobel prize given in the seventies to a gentleman by name of Harry Markowitz over this concept of risk versus reward. And he developed an analysis of how you should invest, how much in stocks to bonds, how much in large companies, medium to small companies, the international of the ideal investment, where you get the maximum return with the proper amount of risks that you take.

This is called modern portfolio theory. And there he created something called the efficient frontier. And this shows on a line chart that you want to stay on this horizontal line going to make sure you get the max returns with the proper amount of risks that you're taking. And so the purpose I bring this up is you should be looking at this as an opportunity.

We're blessed here at Falcon Wealth Planning. We were not getting phone calls of people freaking out and saying, "Get me out of the stock market." Why? Because we've trained them that this is a normal occurrence. We trained them that markets go down. And the reason people are freaking out is because they have no strategy and do not know what to do when the markets drop.

Here at Falcon Wealth Planning we do. There are tax strategies that you could do through Roth conversions, tax sales harvesting, required minimum distributions. We've talked about that in previous episodes as well. But you also have to know that what is the account? How long are you going to have it for?

What does that mean? Well, you have an IRA account. Let's say you're 57 years old. You're looking to retire at 65 to 70 years old. You have a decade until you're going to touch the money. Let me ask you this, do you think the stock market's going to be higher than 10 years from now than it is today?

Well, if the answer is yes then who cares what's happening right now? What are you going to do, you're going to sell and go into cash and secure that 20 plus percent loss? Or are you going to go ahead and make changes to the portfolio, potentially rebalance, reallocate and take a look at what you're underlying investments to making sure you're properly diversified.

And if you know the stock market's going to be worth more than 10 years from now, then why are you freaking out? You're not even going to be touching the money. "Oh, well I'm getting older. I can't take on this much risk." Yes, you do need to probably take a look at how you're invested. Are you a hundred percent invested in stock?

Are you 80% invested in stock? What is the other 20% or 40% or 50% invested in? These are questions that are crucial to the security and to the detriment of your future and your finances. When you're working, you don't care, you're saving, you're accumulating your wealth.

When you retire, you stop saving, you stop getting that paycheck from your employer or if you're self-employed. You now have to create your own wealth and income for life. But you cannot get emotional about this folks. Because you have to understand that as long as you're not investing in individual stocks, which I typically do not recommend because they can go to zero.

Look at Lehman brothers, Barrett Stearns, Washington Mutual, RadioShack, Toys-R-US, Robinsons-May. Folks, it's never going to stop. There's always going to be companies going out of business and a new company, taking them out of business. Instead of trying to find that new company that's going to take them out, how about you invest in everything?

When you invest in everything, the importance of that is you will get that secure return. Now, when I say secure, it doesn't mean you can't lose money in the short term. If you invest in indices, indexes, the economy's job is to grow, company's job is to grow.

And by doing that, they're not going to want to be happy with two to five percent returns. Their goal is with growth and income to get that seven to 12 percent returns. Why is Google trying to get 10, 20, 30 percent returns along with Apple's? Because they still have a market share they want to get. And we're seeing a repricing of those as they've had significant drops recently as well.

The point is there is no way around proper diversification. By the way folks, if you're just joining me, you're listening to Gabriel Shahin, certified financial planner and your host of More Knowledge, More Wealth! Here on every weekend, talking about all important topics of personal finance. And if you want help with this, if you want help relating this show to your situation, give us a call.

Our phone number is 855 963 2526 that's 855 96 Falcon, like the bird. We'll be happy to put a personal assessment for you to really help answer the questions that you may have. Because investments are great. Individual stocks are fantastic. General electric was a mutual fund in itself. Was amazing until it stopped being amazing.

It's worth a 10th of it was before. And so the value of things change over time. You might talk to people at a cocktail party and they'll give you stock advice. Maybe it's a holiday party. We'll call it a Christmas party for the masses. And you go over there and you say, "Hey." You hear from somebody, "You should buy this stock.

Oh, this is a great stock. Oh, how did you not invest in that?" And then you see them next holiday party. We'll call it Christmas again. And then they'll say, "Hey, what happened? That stock you told me to buy was down 30%." "Oh, you still own that? I sold those months ago." You're, "Oh, thanks."

They'll tell you when to buy, but they'll never tell you when to sell. And the irony is they're probably lying to you. And it's not because they're evil, it's because it's human nature. People remember the good. And in reality, academic data has proven through [inaudible 00:08:21] and associates that for every one investment you get right, you get five wrong. Think about that for a second.

This is why there's a lot of [inaudible 00:08:30] studies that go out there that show that average investors, normal investors, you, professionals even that do individual trading on their own do about 40% of what the markets have done. What does that mean? Markets have averaged 10, 11 percent. Average individual investors do 4%.

And we're talking about Of 20, 30 plus years. And this is consistent. Why? Because you freak out of the market. You see what's going on, on the Dow Jones, NASDAQ and S&P 500 and you're freaking out. You're selling when everybody should be buying and you're buying when everybody should be selling.

You probably bought Tesla, didn't you? At a thousand a share. Good for you. It's at 700. Bravo. Hey, is Tesla a good company? Sure, it's a good company, but you're buying it at the wrong time. You're buying it. You're jumping on the bandwagon. You heard of that, right? How does that work out normally, it doesn't end well. And then what do you do when it's at 700?

You probably sell it because you're thinking to yourself, "Why me?" I know why you're thinking, "Why me?" Because the world revolves around you. Don't you know that? Can't you call us when you're about to buy a Tesla or an Amazon or a Google or a Peloton or an AMC or whatever? Because you know what happens when you buy it? I know what happens when other people buy it, that thing skyrockets right to the moon.

I know that. But when you buy it, what happens when you buy something? It's probably because of you, the stock market's dropping, right? You probably put in 10, 20, a hundred thousand dollars. And look, you caused the stock market to drop because you know the stock market revolves around you. Yeah. It's your fault this happened.

It's your fault that Tesla has dropped. The joke I'm making here, folks, it's not really your fault, is that this is the classic bandwagon effect. If what I just said on that 30 second rant sounds similar to you and you can relate is because you are normal. You're not wrong, you're not stupid, you're not... You're normal. You are handling the proper behaviors of individual investors.

I mean, just emotional individuals in general, right? When something's on the news, we pay attention. When somebody says something, we've been trained our whole life to listen and act. But the problem is you're late to the party. And the problem, what most people do is they try to time when's the best time to go to the party.

Hell, just go show up early and just show up at every party. You're bound to have fun at one of them. That's what parties are for. This is a classic example of diversification. This is what we recommend that you do. It's boring as hell, folks. It really is. And I'm sorry to tell you, but it's the wise thing to do.

Folks, we're going to be right back. We're going to take a little break. If you have any questions. If this sounds like you, if you want help, give us a call. This is what we help a lot of our clients with. Our phone number is 855 963 2526 that's 855 96 Falcon, like the bird. Look forward to serving you.

Welcome back, folks. This is Gabriel Shahin, certified financial planner and your host of More Knowledge, More Wealth! Here on every weekend, talking about all important topics of personal finance. Our goal is to give you the knowledge you need to increase your wealth.

Now we talked about in this first segment about this stock market, this crazy stock market. And we talked about people freaking out, jumping on bandwagons, whether they're jumping on or off. They either jump onto late or they jump off too early. What do I mean by that? Stock markets drop and people are freaking out. And they're wanting to get out.

They bought into the market too late and now they're getting out too early. What does that mean? Well, do you think that the companies that have dropped in value 20, 30 percent, their intention is to not make money going forward? The grocery store, are they going to stop selling groceries now because the priced of their stock drop by 20, 30 percent?

What about Apple, Google, Amazon? Are they going to stop selling things? They have no intention to grow their markets or sell more phones or come up with new information and things for us to buy. No. What about banks, are you going to not keep your money in banks because the financials have dropped?

You have no intention to have your money in there or ever get a loan ever again, even with interest rates going up? Get my point? People are still going to live life. And when you're globally diversified into the markets, then you know that these company's intentions are to make money.

Who cares about these one or two drops of these tech companies or other companies that are out there. It doesn't matter. When you invest properly and you're invested in 35,000 different global companies through indexing, who cares if one company goes out of business or five or 10 or 50.

It doesn't matter, folks. And especially if you're not going to need this money for five, 10, 15 years. And even if you're retiring at the end of this year, it's not like all your money is invested in the stock market. I know what you're saying, "Well, bonds are down."

I'm not happy with bonds. Normally bonds go up when stock go down. That's true, except we're in a rising interest rate environment. So how are you invested? When was the last time you had that reassessed? When was the last time you had somebody's, a professional's opinion?

You can't just blindly put your money to work and thinking, hey, what I did last year, let alone last week, let alone last decade is going to be good for the next one day, one week and one decade from now. You have to be proactive with this. There's no alternative. Aren't you aware there are billions of dollars, trillions of dollars in the institutional space?

They can hire people, staff of five, 10, 20, 50 people. Pay them each a million a box and they would still save money based on the management fees that they're paying other outside professionals. What's my point? You can't afford to be cheap. And institutions realize that, why can't we?

We talk about it all the time that other people, "Man, the rich keep getting richer." Well, the rich keep spending too to get smarter. I'm not saying you're not smart. Institutions are very smart individuals. CEOs are very smart individuals. Politicians are very-. I should stop there.

You get my point. My point is you have to be proactive. And by taking advantage of just discussing with somebody what you're doing, what you should be doing, this is the time to do it. When else are you going to do it? I mean, you got to understand, your situation is only going to get more complex.

Whether you're working right now, whether you're going to eventually take Medicare, social security, whether you're going to retire, whether you're going to buy a house, whether you're going to look for acquire new debt, new property, new business, it's only going to get more-. Well, when I retire, it's going to get simpler.

Is it though? Is it? You'll have more time on your hand, but you have a whole new taxations that you're going to be subject to being retired. Social security gets taxed at a different way. When do you take social security? When are you going to take money out of your retirement accounts?

The capital gains are going to be taxed differently than you were working potentially. When do you realize those? How are you going to invest? You're going to invest towards interest, qualified dividends, ordinary dividends? Where are you going to invest your bonds in the portfolio? Where are you going to get stability if the market drops 30%? What are you going to sell?

It may seem simple. And frankly to me, it is. I do this every day, but it's also not my money. So if the market drops 30% and I see my million dollars goes to 700,000. Because it's not my money, I don't care. I stick to the plan. I mean, I care because we get paid off of it.

I don't like to get a 30% reduction in my pay. Because in essence that's what happens when you get a percentage of the portfolio. But at the end of the day, we stay disciplined. And not just of the millions, but the hundreds of millions that we manage.

And it's just important to note that when people are doing it on their own, which is fine, but they freak out and they start thinking, their mind starts going, "Do I have to affect my lifestyle. Oh, I just take out less this month."

But is that necessary if you had a properly allocated portfolio? And it's not just stocks to bonds, but it's how much do you have in stocks and where do you put the bonds. Especially now with the rising interest rate environment.

It's the first time in 40 years that as the stocks drop, bonds are not going up because interest rates are going up and the bonds are also dropping in value. This is a scary time. By the way, folks, if you're just joining us, you're listening to Gabriel Shahin, certified financial planner and you're host of More Knowledge, More Wealth! Here on every weekend, talking about all important topics of personal finance.

And we are talking about the stock market and the volatility and why people are freaking out. Just because the market dropped today. Even if you're retiring next year, it's not like you're going to, or even this year, you're not going to liquidate the whole thing on retirement day number one. Come on now, think about it.

Heck, I could argue I'm so happy the market has dropped. I love market drops. Why? You get to buy in cheaper. You get to sell things that have made you money, assuming you're properly allocated, and buy what's on sale. Hey, thank God it happened now and not deep into retirement. Right? Don't you want to buy in now before. Don't freak out, don't be emotional.

People make so much mistakes when they get emotional. Some of the biggest arguments I got with my spouse, my wife is our emotions getting the best of us. We say that all the time. "Oh, I'm sorry. I know. You're right. Sorry, honey." And it's true. We're idiots sometimes. And when they're wrong, they're idiots.

Everybody's idiots. Why? Because we're emotional humans. Nobody is perfect. Come on. Well, you're going to put our finances with that type of emotional instability? Have a plan guys, put it together. You can't afford to make mistakes. These mistakes can cost you irrevocable changes to your future retirement and to your future planning.

If you need help, give us a call. This is how we're helping thousands of people, thousands of people on an annual basis. Our phone number is 855 963 2526. That's 855 96 Falcon, like the bird. Or visit our website at falconwealthplanning.com. That's falconwp.com for short.

We help people all across the country and have offices all across the country where we can help really relate this show to your specific situation. Because the markets are not going to stop being volatile. And people get excited when markets are doing great, but it's when markets are down, you should be not equally as excited because I hate losing money, but you should be excited for opportunity.

Be positive. For every negative thing that happens, you should be positive. Tell me about a negative thing that's happened in your life, I will find a way because I'm a positive individual to make it positive. Really? It could be death, it could be job loss. It could be something negative in politics, anything.

I had somebody, a family member, my uncle, 87 year old uncle graduated from Arizona state university in 1963. And he goes, "Our president, president Biden, give me something positive about him." I go, "You know what? At least he's mellow. At least he's calm. At least it's arguably less tension with a Democrat in office.

Because a lot of the Democrats sometimes are really aggressive on the news. So at least we have another side that's at least calmer. Whether you agree with him or not, at least you have less people frantic and less relevance coming out of his mouth than the previous president that would be really so forceful and forward with the other side of it."

I'm not saying I disagreed with it. I'm just saying it rubbed people off their other way. Our current president doesn't really have as much substance as the previous one. So how is it hard to get upset or get riled up when he talks, when sadly, him talking is painful to watch just in general. But he's not really pissing off, directly pissing off people like the previous president.

And I didn't mind the previous president. I'm going to go as far as saying I liked him, made some drastic positive changes. Look at our current tax saw that saving people, middle class and wealthy people, millions of dollars, thousands of dollars. I don't know how you can get upset about that.

So the point is, is there's always a positive part and a positive spin you can do on it. And that's the same thing with the stock market. Anytime it loses money, there are strategies that you could be doing. Because you'll know what, if you like the stock market six months ago, if you like that car six months ago at 50,000, don't you like it now at 40,000?

Wouldn't you like the stock market better now down 20%? You get my drift? It's the people who don't have no strategy, people who just complain, people who nag, we don't like that. Focus on the positive is my recommendation to you. By doing that, you will win long term.

And if you want help finding the positivity in this market, in this economy, this political climate, this geopolitical world, give us a call. That's our job. Because I promise you this, no matter what happens, no matter who's president, no matter what war is out there, Coca-Cola still wants to make sure you drink their drink and the same with Pepsi and McDonald's want to make sure they're still always open for you to eat. And you get my drift.

It doesn't matter what the business is, you're still going to have money in the bank account. It's needed. Certain bills you have to pay via check only. Less unless people are taking cash now because of COVID. You get what I'm saying? Give us a copy if you have any questions on this. We can head shed light and help answer the questions you have.

Our phone number is 855 963 2526. That's 855 96 Falcon, like the bird. Folks, that was a fast fast show. Appreciate you tuning in with us this weekend. Feel free to reach out to myself or any one of our colleagues here at Falcon Wealth Planning.

Our phone number is 855 963 2526. That's 855 96 Falcon, like the bird. Join in every weekend as we go over all important topics of personal finance. Remember, our goal is to give you the knowledge you need to increase your wealth. We want to appreciate you for tuning in with us this weekend. We want you to have a great week, have a great weekend and God bless.