Ep 176: Taking a Look at an "Interesting" Market - More Knowledge, More Wealth

 Transcript: This is More knowledge, more Wealth with your host, Gabriel Shaheen. Gabriel is a certified financial planner and a registered investment advisor at Falcon Wealth Planning. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the services or securities discussed are suitable for any.

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 . Now, here's your host, Gabriel Shaheen. Good day. This is Gabriel Shane, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.

My goal is to give you the knowledge you. To increase your wealth now to the listener, 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 8 5 5 96 Falcon. Like the bird, or visit our website@falconwealthplanning.com.

That's falcon wp.com for short. Folks, we have over hundreds of reviews through all our locations. Would love for you guys to give us a call. We can help. Now, I'm a principal of Falcon Wealth Planning. We are a fee only non-commissioned true fiduciary, 100% of. , uh, where we can help relate this show to your specific situation.

Folks, we talk about everything that involves a dollar sign. That's where you are today, how your financial situation looks like, what struggles you may have, what retirement looks like, what you should be doing now, and prepping for retirement or in retirement. Talking about taxes is one of our biggest initiatives.

Investments, a estate planning insurance. Folks who name. Anything that involves a dollar sign, folks, and we are offering a free financial assessment yet again to help relate the show to your specific situation. Folks, we got offices all across the country. We are happy to help folks, we can help you out.

Our headquarters is here in Southern California, but folks give us a call. Our phone number is (855) 963-2526. That's 8 5 5 96 f. Like the bird. We would love to help out with your situation and really identify the things that you should be doing, because right now the market is absolutely interesting. Why?

Because we came off a very terrible 2022. Now almost every single asset class has dropped. Now you start looking at what's happened so far in 2023. As we finish now one full month entering into, quite frankly, the middle of Septe, uh, February, excuse. and you just, we came off the large cap growth companies having a terrible year down, roughly 30% last year.

Now, when you look at what it's done so far this year, in 2023, year to date, by mid-February it, excuse me, by about the first 10 days of February, it is roughly a 15. Percent return, 14% roughly return for the year. Now that is a big, big deal. Why? Because value companies, by the way, are up about 7% for the year.

So the stock market is up this year, but when it was doomsday and everybody's looking at just the negativity of investing in the stock market because almost. Everything has dropped. Everybody was looking to get out of it. It's like the classic case, folks. It never, ever fails when you are fearful, yes.

Sell or other people are buying. Now the big thing is talks about this recession, right? Well, you gotta understand that our government is now taking a position that because. unemployment is so low they cannot justify calling it a recession. Whether we agree with that or not is their prerogative. My point is, is that when you take a look following a negative year, even bonds have done well.

Bonds have also rebounded roughly 6% from mid-October of 2022. So that's just the general bond index, looking at symbol like B and D, which is the Vanguard total bond market. So looking at that, almost everything has now entered that rebound stage. And oh, by the way, if the government ever says it's a recession, by that time, Already crawled its way, ba back out of it.

That might be something of a reality that we're seeing. And the reason I mentioned that is, and I've been saying this on air for over a year, this might be the first time we actually see what's called what I have called a silent recession. Why is that? Because, well, if a company used to net $1 billion and now nets 1.1 billion, well that 1.1 billion doesn't buy as much.

That 1,000,000,002 years. Why all their prices has gone up. So what am I trying to tell you? I'm trying to tell you right now that we are seeing strong earnings from a lot of different asset class, a lot of different sectors, and taking that into account, you cannot be so sure of what's gonna happen in the next 12 months and you shouldn't be taken into account what happened in the past 12 months.

Maybe if you were to take into account, you should say, Hey, the market did very bad last year and historically speak. . It does good afterwards. And that's what you're seeing right now. Why? Because the market's rebound in anticipation of anything. They are the leading indicator. By the way, folks, if you're just joining me, you're listening to Gabriel Shane's certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.

And right now we're just discussing just the rebounds that we're seeing so far this year where you're. large cap growth companies up roughly year to date, 14% value companies, large cap value companies are up roughly 7% year to date. You have from middle of last year that the bonds have rebounded roughly 6% last year.

You gotta look. Value companies outperform growth companies by 30%, and I'll take it a step further. Historically speaking, when you go from the Great Depression, preg Great Depression in 1926, the value companies outperform growth companies by roughly 4%. This is important because historically speaking in low interest rate environments growth, Companies do great.

Why? It's so easy for them to lose billions of dollars and borrow money from the banks at a low rate. Borrow money from private equities, from investors, because money is cheap and easily accessible. It's not as easy to get a loan anymore. There is more constraints on that to the banking system. That's what happens when they start tightening.

Money supply. So my comment to you is that in rising interest environments, which, oh by the way we're in right now, you have to factor in the obvious. What does obvious mean? The obvious means is that people right now are not as comfortable to spend their money, and that means growth companies are gonna.

and they can't consistently lose billions upon billions of dollars and just expect to get money from other people to help make it survive. Now you have seen a resurgence growth. Now factoring that a lot of this growth is coming from the large cap companies. Now the top largest five companies are, we can say Apple, apple, Microsoft, Google, Amazon, throw in Facebook while you.

This is crucial because those companies combined roughly is over 10 billion, 10, excuse me, trillion dollar valuations on arguably a hundred trillion dollar global market capitalization. That's arguably what the whole stock market is worth. . So you got, these five companies represent 10%. Now these companies are profitable.

Everyone that I said is profitable. They're making and netting billions upon, billions upon billions of dollars on a quarterly and annual basis. So this is important because that yields to the price of the stock based on what they earn. It's actually. Pretty affordable. We could argue they're good prices.

Not on all of 'em, but on a lot of the ones that I discussed, you got Google right now at A 20 pe, Google, some would argue is still a growth company. They still have innovations that they are working on. So what does this mean? What this means is that these companies, these growth companies, and they have had a good year, you know, based on what the market has done, growth companies has done well, the rebound has kind of happened, but what the market is saying is that these companies are cheap and that's why they increased in value from January 1st, and even it's low of last.

This is why having a globally diversified portfolio is important. Cause we've been talking about this whole time, arguably one asset class. Yeah, I mentioned about bonds and value, but this one asset class has really affected last year's underperformance of the market. Nobody expected a 20% loss now. A lot of analysts, including us at Falcon Wealth Planning did say growth is extremely expensive.

This is why we took our profits off the table for a majority of our clients in December. We said, this is, it's just too high. It's you made too much money in 20 21, 20 20, 20 19. And so there had to have been some type of a repricing. Now, keep in mind, taking profits off the table through 20 19, 20 21 did happen.

So repricing is an an inevitable thing that happens in the stock market. My point to you is what are you doing? Are you still buying and holding that investment that you had in tech, in large tech, in individual companies? In the index, in the mutual fund? This is why some people get stuck in a trap, like, oh, by the.

the.com era. In the.com era. It took over a decade for the market to come back to where it was. It took 14 years for NASDAQ to come back from. Its all time high. This is why it's so crucial not to put all your eggs in one basket. This is why diversification is key. Something as simple as last year, value outperforming growth and 2022 by 30%.

What do you think? What was a discipline thing to. Sell value and buy growth and look what's happening this year. I'm not saying you should. Growth is better than value. We could argue that, uh, research, global research, award-winning research, Nobel Prize winning research has proven value, actually outperforms growth.

I'm just suggesting that it's important. Everything. Don't bet on one car in the race bet on all the cars in the race because most of the time, most of the cars finish the race. When you put and bet on one car. What if that car doesn't finish the race? You can't afford for your money to go and disappear.

That's not an option. Failure is not an option with your life. So all I'm suggesting is. Bet on every car in the race. And with investing, it's not betting. Why? Cuz you're investing in companies and those companies. Goal number one is to stay in business, obviously. Common sense. Number two, it's to make money.

And when you own a business or you're working somewhere and you're paid on profits or. or whatnot, your goal is to make money. As long as you know you are going to work for that paycheck, then you know the stock market goes up. Well, we know it goes up and down. I'm not saying you're guaranteed to make money every single year.

Look at 2022, but over long periods of time, the guarantees get bigger and. You can't fully guarantee, but it gets closer to a guarantee as possible. If you need help with this, if you want additional clarification, if you wanna see if this makes sense for you folks, give us a call. We would love to help.

Our phone number is eight five five nine six three twenty five. 26. That's 8 55 96. Falcon like the bird. Folks, we're gonna go on a quick break. We come back, we're gonna talk about more about the markets and what you should be doing and the things you should be looking at. We'll be right back. This is Gabriel Shaheen, certified financial planner.

Your host of More knowledge, more Wealth. That's on every weekend. We're going over all important topics of. Finance. We're going over retirement planning, making sure you're prepared for retirement, social security and strategies, real estate taxes, avoiding them now and in the future, investments, reducing fees, commissions, and so on.

Insurance and estate planning. Folks, we are offering a free financial assessment that you could take advantage of. We have offices all across Southern California, including the inland. Hire, give us a call to take advantage. It's a $500 offer. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the bird, or visit our website, falcon wealth planning.com.

That's falcon wp.com for short. Enjoy the show. We look forward to serving you.

Welcome back folks. This is Gabriel Shane, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal commands, and we're talking about this crazy market. We were bashing the stock market in 2022. Now all of a sudden, 2023 comes along and people are a little bit happier.

And you were originally loving large cap growth companies in 20 19, 20 20, 20 21. And what is large cap growth? These were the apples of the world, the Teslas of the world, the Googles of the world, the Facebook's of the world, Amazons of the world. Now what happens now? Everybody's ups. Sat at 'em and getting out of 'em.

And the same thing was happening with value companies that were underperforming. Oh, by the way, the same time growth was overperforming. So they were selling their value and getting into growth. And then what happened in 2022, the value outperformed growth by 20% or by 30%. So it's just one of those things that people continue to chase the next shiny object without staying disciplined.

And the problem is, A drop, like a 30 per per percent plus drop in 2020 for large cap growth companies. That is massive. I mean, yes, you'd spend all that time accumulate, accumulating all that wealth. Your million dollars could drop easily to under $700,000, and just because you made 15%, almost about 10 to 15% in 2023 so far this year, well, that doesn't bring you back half of where you were before.

Right. You make 10% on 700,000, you're at 770,000. You're still down 23%. The math doesn't work in your favor like that. You can't think that way. So my comment to you is simple folks, is stay diversified. You were probably hating international in appointed time. And what is international doing? Merging markets off roughly 17% from its high or from its low from October to about mid-February and.

that was emerging markets developed Markets are up over 20% from, its low in mid-October of 2022. So it's like, guys, you can't outsmart this thing. Nobody can. Nobody can tell you when to buy and when to sell something, but what you could do is build something that's customized to you and discipline where it says, I only want 10% in this one holding.

If it goes higher than 10%, well it shouldn't actually go over time higher, but you have to compare that to every other holding. If all holdings all at the same time, what a 10%, which means the correlation is a hundred, then you don't have to do anything. You don't sell it cause you have to buy something else.

What happens is one goes high, one goes higher, higher, one goes low, one goes lower, or one goes up and one goes down. This is what a properly diversified portfolio should. I'm not trying to say build it out where you're net neutral all the time. As we know, markets over time go up, but you have to stay disciplined and known when to buy, when to sell, and to do that you have to understand that each holding has a set percentage based on the current value of the portfolio at that time.

What does that mean? If you need a holding, let's just call it international emerging markets. Let's just say you have a hundred thousand dollars and you want 10% in that, holding that 10,000, okay? 10% of a hundred thousand is $10,000. If that position goes up by 10%, so now you don't have 10,000. You have.

11,000, but the stock market's gone up 20 thou percent, 20%. That means your portfolio, let's just simply talk, is now worth 120,000. You need to buy more. of that emerging markets in that specific example. So it's not as simple as, oh, and made 10%. Let me take my profits. You have to compare it to every other holding and your total portfolio.

This sounds simple for some people, but my point is how come people aren't pulling the trigger? Because they're lazy. They're thinking buy and hold. They're missing the fact that you could have taken your profits and saved on a 10, 20, 30% plus drop. And most people are like, I'm not gonna buy bonds or fixed income specifically.

And I get the logic behind that. But with that being said, What are you putting it in? I know you're, that doesn't give you a reason to let an asset class just right away where all of a sudden a point of time happens and you've gone five years and not made any money on your money. Makes more sense to take the profits and redistribute it to something else.

And what do you redistribute it to? Something that's made less money. Yeah. You heard me. You sell something that made you money to buy something that lost. now before you are getting upset and turning the station. My comment to you is simple. You're doing what every investor of all time wants to do my Now my point is, you're not doing it, okay?

You're buying your investment and sitting on it forever. I'm just telling you, you're doing what every investor of all time wants to do. Sell high and buy low. The problem is you don't have something into your portfolio that's like that, that. Uncorrelated to your current asset class, and it's even more difficult when you start investing and buying individual stock.

By the way, folks, if you're just joining us here, listening to Gabriel Shane, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance, and today we're just talking about the simple concept of diversification, and I see it all four too.

Often people get rich with an individual asset class or stock, and they lose their. Because they didn't diversify. You make your money through individual stocks, but you stay rich with diversification. You become rich with diversification. Now, rich doesn't mean you need a million bucks. Rich means you have enough assets to maintain your lifestyle.

Ultra width rich are those who can increase their lifestyle. I'm talking about the mass affluent. Those are the individuals that we like to help. We don't like just to help the rich get richer. We like to help the aspiring become rich. Folks, if you need help with this, if this sounds like you, especially whether you have a 401k, whether you have an investment account, whether you have a current advisor, I mean, how often are you communicating?

Talk to your advisor. How often is that advisor just focusing on investments or trying to sell you things versus looking at your overall financial situation? That could be your taxes, that could be your biggest expense, whether you know it or. , that could be what and where you're looking to retire. That could be when to take Social Security.

That could be about estate planning, protecting you, your family, your heirs. Folks, give us a call. We would love to help, and we have offices all over. Okay? Our headquarters is here in Southern California. Our phone number is eight five five nine six three twenty five. 26. That's 8 55 96 Falcon like the Bird, or visit our website@falconwealthplanning.com or falcon wp.com for short.

Folks. I just see it far too often where people are just following the next fad, and I'm telling you just if you stayed and, and it's crazy if you stayed on the path where you are happy with market-like returns, which market's done over 10% historically speaking, like the s and p 500. Others like international, historically has done more than that.

Small caps have done more than that, so I'm recommending that you stay in large cap, mid-caps, small. International developed markets, emerging markets, each of those large cap, mid cap, small cap, and then fixed income. By having a globally diversified portfolio, this will help secure not losing all your money or not losing a majority of your money, not having a substantial loss in your portfolio.

I see it all far too often. I'm recommending that. , seek help in understanding what you're currently invested in and what you should be investing in. It's just unfortunate because then what happens when you are in a situation, you become upset, you become cynical, you become just hateful of saying, why you, I'm telling you, now is the best time to take a peak at it, especially as the market is starting to be in that confused stage as last year in 2022 was very bad, and so far this year has been fairly.

You can see the market not knowing what it wants to do with one day up a few percentage points when they mark down a few percentage points, it's not as volatile as it was in 2022. With that being said, volatility isn't always losing money. Volatility can also mean making money, and you are seeing from stocks that are losing half its value in a few months to double.

in a few months. Something as simple as Tesla or a few others. I'm just suggesting that instead of chasing individual stock, think long term if you had a seven to 10% rate of return, this isn't a guarantee, folks, this is generally speaking just what markets and indices do. I'm not here saying B. What planning guarantees that?

Even though it's easily our target rate of return, obviously that's a target rate of return depending on the portfolio, right? But if you get, let's just say a 7% rate of return, You double. You double your investment in 10 years roughly. And that's important to note because if you're continuing, if you might feel like you might be in your fifties with a hundred thousand in your retirement account saying, I don't know, see how I'm gonna retire, well, if you properly invest it, that a hundred thousand can easily be half a million dollars by 65 years old, assuming you've not.

Uh, excuse me, uh, by, uh, not, by not 65 years old, if you're 50 years old, that money can easily be $400,000. Assume you haven't contributed anything, and if you are starting to contribute something into that, depending on what you contribute, that can easily be half a million dollars. Why is that important that half a million dollars can generate $2,000 a month?

You add that to the two to $3,000 a month of social security, maybe your spouses half, you can have 6,000 a month. Just with those simple concepts, assuming there. any more that you're adding to the accounts. 6,000 a month is double the amount the average American brings in an income. Currently in retirement, it's three times more.

You just need hope and a direction. We've solved this puzzle thousands of times already. We've helped thousands upon thousands upon thousands of people. Oh, by the way, just on an annual basis, not even considering throughout our lifetime, give us a call. We would love to help folks. , our phone number is (855) 963-2526.

That's 8 5 5 96. Falcon like the Bird folks, we have offices all across. We're all certified financial planners. We're extremely competent in what we do, and there's no cost for us to give you a free assessment. One to two meetings, one to two hours of our time with no cost folks. Give it a shot. It's worth your time.

This is the best time to do it, especially since we specialize in tax planning, let alone what's going on in the investment. But tax time is upon us. Take advantage. You almost get two tax here for the price of one, right? You're right now working on your 2022 taxes, plus you're in tax here. 2023. This is the best time to do it, folks.

This was just a FAS show. It's always a fas show cause there's always a lot to talk about. Feel free to give us a call. Any one of our colleagues will be able to help relate this show to your specific situation. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the Bird. Folks, we can help relate the show to your situation and please be aware of what's out there and get professional help.

That's unbiased, true fiduciaries, and feel only like us folks. Appreciate your time. Have a fantastic weekend. Have a great. And God bless.