What Should You Do When You’re Nervous About the Stock Market?

On this episode of The Dentist Money Show, Matt, Rabih, and Jake discuss how market volatility, political uncertainty, and unsettling headlines can lead investors to question their financial strategy. They explain why trying to time the market  can be difficult, how missing just a few of the market’s best days can hurt long-term returns, and why emotional investment decisions can do more harm than good. Tune in to learn how to navigate market uncertainty without letting short-term worries derail your long-term financial goals.

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Podcast Transcript

Matt: Welcome back to the Dentist Monday Show where we help Dentist make smart financial decisions. I’m a guy named Matt, and I’m here with Hot Take Jake and the professor

Jake: What’s up?

Matt: Rabih Dimachki How are guys?

Rabih: Good, how are you?

Matt: Doing great, Jake? Feeling good.

Jake: Just feel great to be here. Yeah. I’m stoked. Yeah.

Matt: We got winter upon us. It feels it’s raining

Jake: Kind of.

Matt: like every day in Utah. Tend today’s beautiful, but

Jake: Sunny today. Yeah.

Matt: it’s been a very, very wet kind of end of October.

Jake: I think we are in for a wet and snowy winter, which we did not have last year and

Matt: We need it.

Jake: It was chaos, but I I’m just getting this sense. This is not based off any science that we’re gonna have a lot of snow

Matt: But apparently this is a big winter. Rob Rabih probably knows the history of the Ninas.

Rabih: It’s El Super El Super

Matt: El Super Nina.

Rabih: Nino this year.

Jake: There we go.

Rabih: El Nino this year. It just means there’s a higher temperature than usual at the equator, which means more water evaporates, which would lead to more downfall in other regions that are not around the equator. it’s it’s more downfall but higher temperatures. So but I think you to that will mean it’s snow either ways.

Jake: And a perfect ski season, Rabih.

Matt: Yeah, we need it, Rabih. We need it. okay. Well, again, as always, this show is brought to you by Dentist Advisors, Dental Specific Financial Planning and Accounting Firm. You guessed it, just for dentists all over the country. If you ever need to talk to us, get a question answered, get specific advice on your situation, we are here to help. You can go to dentist advisors.com, click on the book free consultation button. okay, guys, we’re gonna give a little bit of background on this discussion today. This originated from Jake. So Jake, we hopped on yesterday to talk

Jake: Yes.

Matt: About student loans. But as we were hopping on, you told me a st because you had just gotten on or you were just on a call with a client. We’re obviously gonna keep this completely anonymous, but you were talking to a client and you were like, and you I’m gonna let you take it from here to kind of set up this discussion.

Jake: Yeah, and we wanted to have this podcast because this is one question from one person, but it’s likely that I think a lot of other people may be feeling the same thing here. We feel like this can apply to a lot of people and dentists out there. So the broad strokes of the conversation were this this person had invested a decent chunk of money at the beginning of this year, where it was just there was a lot of cash on hand. We needed to get in the market, put the money in, we invested it. Majority of this money went into a brokerage account, which is like a liquid, flexible. The money’s not tied up in the long term. There’s no penalty for accessing or taking this money out, anything there. put a decent amount of money in the brokerage account. And we just had a conversation the other day where this person said, you know, I’m feeling a little bit nervous about what’s happening politically and economically and just things happening in the world. And he and this person didn’t really get into specifics of what was going on on or what he’s concerned about. Again, you could probably plug in a myriad of things here from war in Iran to inflation to AI tech bubble to whatever it may be. But just really worried that things are going to get bad here in the short term was kind of the specifics that he said. And he said, I would like to move some of my equity stock positions to cash for the time being, a majority of them to cash. Essentially, I want to get out of the stock market, not forever. He’s like, I still believe in the stock market as a long term wealth building tool. But I’m really worried about the next couple of weeks, the next couple of months, is what he said. He said, I just want to get out for a short amount of time and then get back in after a crash or after the dust settles or whatever may happen here was his main thing to do. I mean, there’s more layers we can get into here, but I wanted I d I think that’s a good start of what he was wanting.

Matt: What yeah, I think that’s great. I think that’s great. So so Rabih, so Jake and I are getting ready to record. We always are kind of doing our our prep and discussion, and he shares this with me. And I’m like, my gosh, like we need to talk about this. To your point, Jake, because it’s I think there’s a lot of people feeling this way right now. and so I message you, Rabih, and I was like, Hey, can you hop on for and I put in quotations an emergency pod? And you have the audacity. To tell me that you’re working. How dare you? How

Rabih: How dare I?

Matt: Dare you, sir? No, I’m just kidding. So obviously, Rabih, you’re working, helping the good people with their investments. And so we hop on today. I wanted to bring Rabih on for obvious reasons, Jake. I think we just need to probably like teach Rabih a thing or two about the history of the markets and like why this is such a bad idea.

Jake: Yeah. Yep. Yep.

Matt: I just think it’s an opportunity for us to teach Rabih, don’t you think? I feel like that’s so

Jake: Yeah, yes, I agree.

Matt: Giving back to Rabih. No. I want to get Robbie’s initi I have some thoughts here to kind of continue this this discussion and but I wanna get Rabih in her first to kind of anything you wanna kinda start with when you hear that story, Rabih.

Rabih: a lot of things come to mind. And I was listening to what Jake said and he mentioned that the client did not go into details. And I have a feeling that had the client went into details and we went through them one by one, we wouldn’t even need a podcast. Not saying that, you know, this won’t be helpful. But because when there is this fear, you are afraid to open Pandora’s box. And sometimes once you open that box, the the illusion goes away. Like you know the magic trick, you know what you’re afraid. And you understand that even if something is happening in the outside world, it does not mean that it’s going to happen to my portfolio, given how the portfolio is structured. So I I would start with that one, but we we can go through all the concerns. I also have some data about elections and markets because happy elections day. And yeah, we’ll see

Matt: Yeah.

Rabih: where that conversation takes us.

Jake: But I I almost feel like this conversation is more beneficial without some of the specifics of the fears, where we can kind of talk broadly to any type of fear that may arise for any clients, whether it is like a political, economic, w I don’t know, geopolitical, whatever event you want talk about. I feel like we can we can have a conversation today that talks to any type of fear that clients may be feeling, not just what’s specific to today. So I actually think it’s it can be helpful for our conversation.

Matt: Yeah, yeah. So let’s start there with I wanted to first make this very clear that when Jake you told me this story and I was so excited to talk about it. It in zero percent of us is like, my gosh, we’re gonna talk about this because this is so dumb, or like this I can’t believe he thinks this. Like, let’s start here. We wanna acknowledge that this is so normal and It is it does feel scary right now.

Jake: I would say quite the opposite, right? We are talking about it because it’s a valid feeling that a lot of people have. So let’s just talk about how to work through this. Yeah.

Matt: Exactly. Totally. Totally. But I do think the reason I say that is because how many times do we talk to people, Jake, specifically our our clients, and they’re like, I know what you’re gonna say, like I know this is dumb. Like they feel like a shame to even feel this way. And so I just wanted to start there of like, hey, this is normal. You you th you are human. You should feel this way. Things do feel scary. especially now, like as you said, Rabih, it we are talking about this on November 3rd, election day. So it feels extra scary. so I think we we need to validate that and say, like, there are things happening right now that feel extra, and a lot of people are out there telling you like this is completely different than the past. I do want to push back on that notion that it is not different than the past. I know if you guys, I want to give you guys a chance to like mention Or give your thoughts on this, but it is not different. This is not different. This is this is not unprecedented. Yes, there are unprecedented aspects of what’s happening with AI and innovation and whatever, but politically and all this stuff, it is not unprecedented. I wanna give you guys a chance to Rabih, what are your thoughts on that?

Rabih: Yeah, it absolutely is is not new. how many elections have we had in this country and how many wars have we had in this country? And how many times did the US was leading in a new technology and we thought that the future will be better, but it’s uncertain how we’re going to get there? how many times have we had worries about the US federal debt? Like this is the same exact, you know, story just coming in different shapes and forms. Since the beginning of modern investing, I’d say.

Jake: Yeah, I I think the worry is the constant here, right? It’s if any of these events were precedented, we weren’t wouldn’t worry about them, right? If that makes sense. Like if they were expected and precedented, the market, we would already have that priced in, no one would be worried. But by nature of how this works, is anytime there’s going to be any turnuless in the economy or the stock market, it has to be kind of an unprecedented, unseen thing that shakes things up. And so we are always going to have a constant stream of unforeseen things that are going to make us nervous. And unfortunately, that’s just life and how this works.

Matt: Yep. Yeah. And then if we add on top of this the people who are the people that are and the kind of media apparatuses that are out there. Is it apparatuses or apparati apparatuses? The apparatuses that are out there that are that are profiting in some form or fashion in getting you to believe that it’s unprecedented. They’re wanting you to believe that for for whatever reason. There’s motives there for we won’t we won’t go into detail, but I I will say what is harder today than probably, well, for sure in the past is the amount of information coming at us. Not saying that it’s all a lot of most of it’s not good, but what what it probably is unprecedented today is it’s so much harder to to navigate this. There’s so much more coming at us. So I will I guess I will acknowledge that. let’s let’s jump in. Rabih, I know you said you’ve you brought a bunch of stats. Shocker. I said Jake, I said on one of the la one of the other shows we had is that I’m gonna start calling Rabih Robbie’s middle name is it’s Rabih, I’ve got a chart for that, Dimachki I’ve got some data for that. But

Jake: Mm. Love it. Yep. Mm-hmm.

Rabih: Ha ha.

Matt: I think let’s let’s get into the meat of like of where this can be so destructive. Like we acknowledge it, we know this is difficult, this is a human response, but why truly with data and and things that we’ve seen, why is this so destructive? And try to Bring some rationality to this.

Rabih: It it is destructive not because of the data per se, it’s because of our reactions. I and I want to start with that just slightly. Like myself, like others, we are reading the same news outlet, right? And a certain headline for someone is going to be incredibly scary. And for other, it might be, I hate the wording of that, but this could definitely mean something else. the reaction for the same headline is going to be different from one person to another. And I think How much of like scar tissue you have in the market will teach you how to read the headlines? But I let’s take today as an example. I’m waking up and they’re saying like the markets are turbulent because elections, Apple had great earnings, but it’s still down. there are talks about probably a ceasefire, oil dropped because of it, etc. NASDAQ crash is still continuing, like all these headlines. And I’m reading them and I’m like, yeah, for someone who just opened the news and reading them for the first time. It is scary and it is very justified that you want to be on the sideline, although that is not how you play the game, but you would wanna be on the sideline until the storm goes away. But I can also look at these data pointers like, okay, the market is down, the market is down, but earnings are up and GDP is doing really well. Valuations are actually more attractive right now, and you can reinterpret the same data according to Economic narrative. I’m not saying that my economic narrative is better than others’ economic narrative, but you can interpret the data where you have a different signal. And once you have a different signal, you might have a different emotional reaction to it. So I want to start by there. It’s like the news is the news, and bad things are gonna happen, and reporters are gonna twist it for clicks, regardless of whether it’s good news or bad news. How you react to that news and where that Data point fits in your framework of analyzing the market on how the economy is supposed to work, I think is where the value is at. It’s not important to access the latest up-to-date information from Reuters, whatever. What’s important is that the data that you receive actually has a place in a very broad, robust framework rather than every time you get a new data point, your whole perspective of reality shatters. I think that is a really important starting point. To get through. And this was a little bit of a preamble, but I just wanted to show you some elections data and show you that if you purely look at the numbers, aside from all the headlines that show up on that time frame, the the reality and where this data fits into the framework is completely different. So let me share my screens a little bit. Over here I have some data that we revamped from our friends at Dimensional. And it’s about election years. So can can you guys see markets returns during election years? Okay. So I just wanted to show you this graph and it is the return of the

Matt: Did you prepare a presentation for us, Rabih?

Rabih: well, I I asked you what do I need to prepare, and she’s like, Yeah, it’s market. It’s etc. I know, I know.

Matt: This was last this was yesterday that I messaged you. This is awesome.

Rabih: So returns during and after US election years, and it’s like a really annoying year. If if honestly, if I can fall asleep for a whole year every single every four years, I would not say no. But if you look at it, you the one in a darker color is the election year, and in a lighter color it’s the year after. And if you see that if you look at the bars, is regardless of which election year we’re looking at, I we don’t think that there is a pattern. And it’s more likely that they head in the right direction. It’s very rare that in the election year it’s down in the year after it’s up, or on the election year it’s up in the year after it’s down. They’re kinda all heading in the same direction. It’s either a bad year for bad two years or a good two years. And that makes a lot of sense because the economy moves in cycles much wider than a a two year period. So Depending on the phase of the business cycle you’re in, the year of the election and the year after and probably the year before kinda all have the same economic characteristics. But what is incredibly interesting is, you know, the number on the right hand side, and then I’ll let you guys react to it. But during an election year when the you know, the market is trying to point at our biggest insecurities and try to make us really afraid of news making the Making us feel that tomorrow is different. The average return during the election year on average has been twelve point eleven percent. And the average return in the year after is ten point nine six percent. And in a grand scheme of things, those are not really any different from each other, especially when it when you’re comparing them to the average return of the S P five hundred since nineteen twenty-eight till twenty twenty five. But it just tells you that maybe that extra fear is a risk premium that is already priced in in the return.

Jake: That’s what I wanted to say, Rabih. The first thing that comes

Rabih: what do you guys think of

Jake: to mind for me is obviously like during an election year, that twelve percent number is higher than the long term average of the stock market. And I wonder if that has to do with just yeah, risk return, right? Where in election years, I think the market tends to be a little more volatile. People are a little more scared. But over time, if you average out these numbers, you’re getting a higher return for some of that risk that you may be taking on by investing in election year. And even the year after, at close to eleven percent. is still slightly higher than the long-term average. And so that was the first thing that came to mind for me is yeah, you actually are getting some reward for investing during these quote unquote riskier years, if we want to call it that.

Matt: Yeah. And and Jake, I wanna come back to your client because it wasn’t just the election that he brought up. In fact, i I don’t even know if he I mean he referenced the election, I think, but he referenced specifically what’s happening in Iran and his worries there.

Jake: Yes, mentioned some Iran, the uncertainty of the elections more than a specific election thing, right? Like that’s just another factor, uncertainty of the elections, maybe some inflation, Iran conflict, all of that. That boiling pot together, all that thing, you know, mixed together.

Matt: Yeah, which again, I think it’s worse in an election year because i and I know, Rabih, the stats you were just showing were like in the presidential election year. Right now we’re talking midterms. But I feel like no matter what, whether it’s midterms or whether it’s the the presidential, it’s kind of the same thing where things are just elevated when it comes to the rhetoric around this is unprecedented or you know. This a you know, if this party gets in, it’s the end of civilization, and then the other side saying the same thing. So, and then you you double down on that with what’s happening in Iran. again, it gets scary. Rabih, I want to come back to something you said earlier, something to the effect of yes, it can be scary and have an impact on your life, but it doesn’t mean your portfolio. Can you talk about that disconnection?

Rabih: Yes. And it’s because portfolios are not humans and it’s a very mechanical way you can build them. That is really the answer. the analogy I have in my mind, but like because my mind is weird, is like you when you’re designing electricity in a room, you can make it that when you flick the switch up the light turns on, and when you flip it down, it turns off. But you can also design the room where if you open the window, the light turns on. When you close the window, then it turns off. We’re we’re saying is that. The way one event causes another event is something in your control and you can construct it. You can go in a portfolio that is exposed to systematic economic risk. And that means whenever companies are making money and our their earnings are growing and the economy is expanding, the portf your portfolio grows. But you can also design a portfolio that is positioned to actually go up. When the market crashes, in a sense, right? There are ones that are better than the other. But the systematic relationship, if this happens, am I linearly exposed to it? Or if that happens, do I expose to it in the opposite direction? Are all stuff that you can construct. And I think this is the craft and the beauty of constructing a globally diversified portfolio. Because when you’re designing such, there are so many components in it. You are, if you’re holding globally diversified stocks, There are around 1500 15,000 stocks in the world that you can invest in. And those stocks, not all of them react to macroeconomic risks the same way. It can be as simple as because they are exposed to different industries. no matter what happens around the world, your your healthcare stock and your utility stock are going to s still earn the same thing because People will need to go to hospitals and people need to get electricity sent to their houses. Whereas if you design your portfolio around energy stocks, for example, while that is a portfolio heavily weighted in energy, is that whenever we think the world is going to in shambles and the market stock market is overall crashing, that energy position is going to actually be going up. Energy this year had a b absolute year. So there are components within it that move in completely opposite directions and different directions from each other, that allows you to create this insulation layer where if something happens outside, it does not immediately and exactly show up in your portfolio. It’s gonna show up in a different direction depending on those knobs and control points that you have, which is the different sectors or the different valuations or the different styles of companies or asset classes that you are holding. And and this is really a science but also a craft at the same time. There is no way to design a portfolio that is the best for all times. So there will be a point where you have to actively make sure allocation changes. You have to track it. You may need to make sure it’s like, yeah, every now and a while I’m I’m going to change the wiring of of how an external event might reflect in in the value of my portfolio. But it’s better than you know, having it n fully exposed, naked in the air, not sure what could happen and how it could hit you.

Matt: Yeah, I don’t want I don’t want to be naked in the air. That’s that’s the last place I want to be. That’s the last place I want to be naked. But I you hit on

Rabih: Yeah, I could I I I wanted to stay exposed, I wanted to go electricity, but then never mind.

Jake: Yeah.

Matt: Something really critical there. And I want to get Jake’s response to this too, because Rabih, you said there’s no there’s no perfect portfolio in the sense of there is no downside risk. Like that, that is the point or that that is the pay to play. That is the that is the price that you pay for the long term growth. And I think everyone knows that in theory. They’re like, yeah, totally. It’s like with Jake, when we have these conversations, I w I was gonna ask you if like this if this particular client had the caveat of like, I’m not trying to time the market, but because we we do we do get that a lot, but there is no world, and this just comes down to like f fun like life, any any aspect of life, when there is any payoff, there has to be a cost. And anytime you try to skirt around those costs or shortcut it. or avoid them, you end up with f far more destructive consequences. That’s just again, take any aspect of of your life. So I I think that’s that’s important to hit on what you’re saying, Rabih. But Jake, let’s get you in here.

Jake: So yeah, so I did ask him, like, what is your big concern here? Like, what are you trying to avoid? What pain point are you feeling? And he said, I guess he’s like, because I still believe in businesses and the market and the economy long term. I don’t think we’re getting Armageddon and a zombie apocalypse here. But he’s like, I would. He’s like, I am scared of just my portfolio value dropping. He’s like, that is scary to me. And I don’t want to see. And he’s like, I want to see. He’s like, I know market timing is tough. Like you said, Matt, it’s really hard to predict, and we can get into some stats with that. But he’s like, is that I’m just trying, he’s like, I feel uneasy and I’m trying to like, I just don’t want to see my portfolio value decline. And that is scary to me and uneasy to me. And I said, that’s perfectly valid. And I don’t think any of us really like seeing our portfolio value decline. It’s not fun when that happens. But moving away from some of the data stuff, I did want to talk about some of the behavioral aspects of doing this and how to perform, which my first response to that to him was, okay, well, let’s just break this down here, right? You’re scared of your portfolio value dropping. Is that because you need this money that you’ve invested soon? Is there a house purchase coming up that this was earmarked for? Is there a is there are you moving? Is there a business you’re trying to buy? Like, do you need this money that you have invested soon? And so are you worried about the market dropping and then your value’s less and you won’t need the funds? Yes. Which

Matt: Which would be valid, by the way. Totally valid, yeah.

Jake: at that point’s like, maybe don’t invest your money there. But he said to all of those questions, no, there is nothing coming up here in the short term that I need my money for. I said, I said, okay, well, this probably is like longer term, at least five to ten year money for you. If you do not need it in the short term, why do you care if the value drops in the short term? If you’re still confident in the market long term and you think it’s going to increase, why not just ride out that fall? Like if you’re not gonna need it, who cares? It’s kind of like, and I pose this to him, it’s like your house value, right? House values actually do fluctuate from month to month and year to year. We usually just don’t pay attention to it because we’re not selling our house that we’re living in from month to month or year to year. So I said, like if your house value dropped by thirty percent tomorrow, would you panic and try to sell it? It’s like, well, no, because I just live in it. I don’t planning on selling it tomorrow. So if you’re not planning on selling it s this money in the market soon, it kind of does not matter to you if the value goes down because we

Matt: Yeah.

Jake: Know that it’s going to go back up. That was kind of my first behavioral thing posed to him. And I think that’s important for all of us to remember is just because the value drops. Does not mean that drop is locked in stone or that we’ve technically lost money. It’s just the assets that we own in our portfolio are worth less tomorrow and we think they’re gonna be worth more at a later point. It is not the end of the world there.

Matt: Yeah, that’s it. The concept of I totally am with you, Jake. The concept of you haven’t lost money because we’re saying it’s unrealized, it’s on paper. I think sometimes the the pushback on that from people I think sometimes is like, well, it sure as hell feels like I’ve lost money. And

Jake: Yes. Yeah.

Matt: and and that’s true. So I I it’s kinda like that gray area of like, No, it’s true that you’ve lost value. Your your net worth is down and you d totally feel that. But I I like your analogy of the house. It I think there’s a really direct connection there. If like if the value of your home dropped tomorrow by twenty percent but you’re not planning on moving, why would you yeah, why would you care? The use

Jake: You don’t really care ’cause you’re still living in it. Yeah, it doesn’t really matter to you.

Matt: is still there. So I think that’s a really good analogy ’cause

Jake: So if you’re planning on being invested for the long term, why

Matt: Yeah.

Jake: Do you really care if it drops in the short term? Would be my response. Other

Matt: Yeah. Yeah.

Jake: than it’s painful and it’s not fun. And I get that emotionally it’s hard to watch your poor failure value die there. But as you said, Matt, that is like the risk return trade-off that we have to keep in mind

Matt: Well,

Jake: Here.

Matt: And the irony here is that we work with a lot of younger people, you know, our typical clients in their mid-40 or early 40s, mid-career. And so the irony here is, and it’s the the the challenge that we face is trying to get a mindset shift here that if you are a net saver, so if cash flow is going into your accounts every single month, it’s counterintuitive, but you actually don’t want the value to be up. Like you actually want it to drop if you’re a net saver. Especially the more money you’re putting in on a regular basis, the more you actually want to see it. It’s it’s a hindrance to you because the name of the game is accumulation of shares of of your investment. So it’s not really the dollar value, it’s how many shares can I can I accumulate. So the more expensive those shares become in whatever your stock or ETF or whatever, the less you can accumulate.

Jake: Again, like if we want to use the real estate analogy here, any big real estate investors like I’m trying to buy 10 to 20 properties, right? It’s like I want to buy them for as cheap as possible. And I’m hoping to get as many properties as possible that can cash flow to me later on. It’s the same exact concept in the stock market. I’m

Matt: Same exact concept.

Jake: Trying to buy shares of companies, as many as I can that can cash flow to me down the road. And if they’re on sale now through a market drop, that might be better for me to buy more.

Matt: Yeah. Yeah. Totally. Let’s get Rabih in here. we’re trying to but just so everyone knows, we’re trying to limit the the amount the energy that Rabih expends today ’cause he does have to teach later today. And so he said at the very beginning, like, don’t let me get too energetic. So we’re trying to keep Rabih at bay a little bit. But let’s get Rabih in here.

Rabih: Yes, but I have three talking points that

Matt: Yes, yes. We’re just warming you up for your class later.

Rabih: I know. So the the first one, I really liked what you were saying, Matt. Like you would want the stocks to be lower. And what Jake was saying is like, if have you really lost money? Here’s the idea. If we agree that this money has no short-term use and you want to use you only want to use it in 10 years. Then the person that we should ask whether, hey, do you feel like you lost money or gained money is not you today. We should ask that to you in 10

Matt: Yeah.

Rabih: Years, right? And if you ask you in 10 years, hey, this is what’s happening 10 years ago, do you feel like you lost money? The answer should be no. The sh the stocks were invested the whole time, they were compounding. Over these 10 years, I did not lose money. But if you tell someone, Hey, 10 years ago ten years ago you decided to park out of the market and not and interrupt the action of compounding. Did you feel that you lost money back then? And that person would probably tell you, yes, I lost compounding, whether it was to the upside or to the downside during that time. So what it means to lose money will actually differ whether you’re asking yourself now or you’re asking yourself 10 years from now. And if that money is to be used in 10 years, then why are we asking ourselves now? And I know that it is annoying, second talking point. I know that it is annoying when the markets drop, but Warren Buffett says something that I personally find incredibly helpful is that when a portfolio actually drops, it does not mean that the value of these assets actually themselves dropped. It’s just what the market is telling you will buy them from you at this price, right? You are still owning the companies around the world. Today The market, Mr. Market is telling you, I’m gonna buy them from you at this all-time high price. But maybe a week from now, I’m only going to buy them from you at 5% lower. This does not mean that the quality or the value of your stocks has changed. It’s just if you want to sell them today, this is what you’d get for them. This does not mean that they changed. And last point is like, why are we talking as if we are in the middle of a recession? We’re only down 2% from the all-time high. So

Matt: Yeah.

Rabih: those are things that came to mind.

Matt: I wanna Jake, I wanna get you in it, but one thing I wanna just highlight, Rabih, that I think is so important here that I think a lot of investors or a lot of people, a lot of people we talk to still have this and we take this for granted because we do this every day. And we’re talking to Rabih every day. So it’s we we acknowledge we take this for granted. But I think people still too often do not make this connection that you just made, Rabih, of I am an owner in this business. Like I actually own this business, just like R Jake, I loved your analogy of the real estate. I’m a a real estate investor. That’s so different than this idea of like I’m just gambling with my money. I’m like going to like set up a three team parlay on FanDuel. Like that’s not even close to the same thing, but still too often we cross these lines or we conflate these concepts of investing in the market for the long term is the same as gambling. My dad always told me that growing up. I’m like, Dad, This doesn’t sound right. And now I’m in this professional mic, it’s definitely not right. It is not gambling. It’s completely different. I love that that you just said that, Rabih. But let’s get Jake in here.

Jake: Similar to Rabih, I have two talking points here that I wanted to hit on. you can do four talking

Matt: I’m gonna hit four after now I’m just kidding.

Jake: points after this. First talking point for me

Rabih: Okay.

Jake: is I I think to this, the person I was talking to, my client here, I think his main thing was like, I know that like long term the market’s gonna go up and things like that. But can I, because we’re hitting into a possibly uneasy time in the market, which I think all of us are saying could very well happen, right? This podcast could be released and we could go into a 10% down swing in the market. We

Matt: We’re gonna get some angry emails, yeah.

Jake: do not know, right? Like we are not saying that we know what the market’s going to do or it’s going to stay up. But I think what he was saying is let’s say the market does go down. He’s I’m trying to avoid some pain. And can I actually get a higher return for myself by getting out at the top ish, right? To this person’s credit. I usually get these questions where the market’s already down 15% and people want to get out. And he is actually coming in at somewhat at the highs. Rabih said we’re kind of two percent ish or so off of highs. He’s actually coming in at the right point. If you were to try and time this, he’s thinking about this correctly. But he’s like, can I get out right now and then get my money back in in a couple of weeks or a couple of months and time the bottom and make some higher returns? In theory, that is possible to do, right? Like in theory, that is like I will make more money by doing that rather than letting my portfolio go down and then climb all the way back up, right? The hard part is in practice. It is nearly impossible to do. Right. We have data and stats around this where some of the worst stock market days, some of the worst days in the stock market with the lowest drops are a company like really close with some of the highest days in the market. And in order to have a good long-term return, you need to be invested for those really good days. And they happen close together. Some of the best market days this century in the stock market came in like the midst of the 2008 crisis, Some of the best days in the market during all that turbulence. So it’s really hard to do. And really what it comes down to is let’s say you were to get out right now. Like, okay, I’m preemptive. I’m getting out in case the market goes down. Let’s say the market does not go down in two months and it climbs up like another two percent. For most people in that situation, you would still say, you know what? I’m keeping my money out of the market because I’m still waiting for that downswing to happen. It’s going to happen at some point. I’m still waiting. So now they are just not invested for months. Let’s say they take their money out and the market does decline, and we have a 10 to 15% drop. You know what happens in 10 to 15% of your off? People are scared and panicking and people lose jobs. And usually

Matt: They’re gonna keep waiting.

Jake: and usually that’s not a time when people want to invest your money. You’re just like, I actually this actually feels really bad. I don’t want to get in the market at this time. And so in both scenarios, what you did to yourself is you just got money out of the market and are sitting on the sidelines, which is really detrimental to your long-term growth. And so it’s just really hard when you make the decision to get out, the decision to get back in is really like impossible and hard to do. And so that’s kind of like this the behavioral aspect of trying to utilize this strategy.

Matt: Yeah, I want to come back to something you said, Jake. You said he’s he said he said it was an exact quote. He said, I’m trying to avoid some pain.

Jake: Yes.

Matt: Yeah. This is why I love these discussions and I love the market. And Rabih, I know you’re gonna we’ve talked you and I have talked about this directly, but again, I’m gonna come back to this like there’s like a core first principle kind of thought here, which is when you try to avoid pain, you almost always cause suffering. So weird, I’m going to I’m gonna come back to a fitness analogy. Avoiding pain by sitting on your couch and eating. What do you what do you eat, Rabih, when you’re sitting on your couch? What what what’s your go to? Yeah. Peanuts? Okay, peanuts. No, but when

Rabih: Mm I don’t snag like peanuts. I love peanuts. Yeah.

Matt: you sit on your couch and avoid pain of working out and and putting your body through because pain it working out’s painful. You do that over and over and over again, you will cause long term suffering. I think it’s the same concept here. And there’s probably a billion other analogies that are better that you guys could come up with. But I like I don’t know. That’s why that’s why my brain works. I’m like sitting here thinking, like, yeah, you could avoid this pain. And the market might keep going down and you feel good in the short term, but you would you will be causing long term suffering and in this sense, less wealth. one thing I want to bring up too, Rabih, you mentioned compounding earlier. The thing I was thinking about as we were getting ready for this discussion is we always talk about compounding in the positive, right? In most cases, where, you know, the Charlie Munger quotes and the Warren Buffett quotes and just the power of compounding. We have all the data on and the stats. But I wanna I I think there’s another part of this that we need to bring up on the behavioral side, which is, and Jake, this is why I think it’s so important we push back on clients in these situations, which I know you did, is the compounding of bad behavior. Like that’s a worry that I have in these situations where a client or dentist out there does this and says, Yep, I’m scared. I’m gonna do this and I’ll get back in later. That bad behavior also compounds. Cause if you do it once, like the the the b the biggest indicator of of what you’re gonna do is what you did in the past. And so that worries me for people is the compounding of bad behavior.

Jake: Rabih, do you know who Master Ugwe is? Does that name ring a bell to you at all? Matt, Master Ugwe, do you know

Rabih: No, no.

Jake: Master Ugwe?

Matt: That does sound familiar. Master Ugwe, it’s like

Jake: He is the Master Kung Fu Turtle and Kung Fu Panda, the movie.

Matt: Yes, yeah, yes.

Jake: Matt, he has a quote in there, and I don’t know why this came to my mind, but he says, one often meets his destiny on the road he takes to avoid it is the Master Ugwe quote there for you, Rabih. it also it also

Matt: Freaking master Ugwe. That turtle is wise.

Jake: reminds me of a maybe a more realistic Peter Lynch quote, who’s a famous investor, where he says far more money has been lost in people preparing for corrections than in the corrections themselves. Which is what Tyr is speaking to Mad, which is just like all preparing and trying to avoid this pain, you actually end up hurting yourself more in the end than if you just wrote

Matt: Yep.

Jake: it out.

Matt: Yeah. Well, and Jake, what you were saying about people who let’s say he again, he does this, let’s say, and then it does drop, and then it’s like even scarier when it’s dropping. When I worked at Fidelity, I was post eight nine and I talk I can’t even tell you how many people I talked to. We’re talking like in twenty thirteen, twenty fourteen, who were still in cash post eight nine because they were like, Nope, I’m still waiting. I just I’m just too scared because of the the the scars from that event. So kind of what you were saying, Jake, is not only do you have to time it you have to time it correctly twice, every time,

Jake: Mm-hmm.

Matt: which is when to get out and then when to get back in. And that is nearly impossible. But Rabih, let’s go back to you on this.

Rabih: No, I a hundred percent agree. And when you get out, you fall into that comfortable trap, Magg Matt, you were saying, and then you end up suffering long term. And

Jake: ‘Cause cash doesn’t move up and down, it just stays there, it’s nice and comfortable.

Matt: And yeah, and but it’s eating

Rabih: Exactly.

Matt: away at your wealth the whole time. Yeah.

Jake: Mm-hmm. Mm-hmm.

Rabih: But th the issue with that, like the you may feel comfortable sitting on the sideline, but in reality you’re harming yourself in terms of opportunity cost. Because and I have I think not to put myself on on record here, but I think I have more reasons to think that the market will go up than it might go down given the current economic environment. So

Jake: Woohoo, Rabih. Okay.

Rabih: let’s say you sit on the sideline and the market actually rallies up because you know, all the oil shock is already priced in, because The ten years stopped going up and now we dropped even back below five because earnings are being amazing and because Anthropic is now gonna go do an IPO showing that it’s still a viable business and the AI trade is good. I’m saying these just to throw in the opposing talking points, not saying that I’m making a prediction. But given all of that, if the market ends up going up and has a Christmas rally by the end of the year, what would have you done? Like if you sat on the sideline to avoid a five or a ten percent drop, but you sat on the sideline and the market went up five or ten percent, that is the same amount of loss. That is the same exact amount of loss. So how do you avoid losing when you aw are aware of all the losses that are out there? It it’s by writing it out. So you make sure that your portfolio compounds either.

Jake: Beautiful framing there, Rabih. My other talking

Matt: Really good, really good point.

Jake: point I did want to get to is just recognizing how hard this is to do in today’s day and age. Like what we are proposing here to stay in your seat and be a a calm investor. As we’ve been talking on this podcast, I literally got an email from Robin Hood. And this is the title of the email. Election Day, Live Prices, Your Prediction. And it goes on to say this check out the interactive map, poll closures, and live vote counting on one place. And trade the prices live as they move.

Matt: Yep.

Jake: This is your investment platform that you have your IRA or brokerage account in sending you an email on election day saying, Hey, be ready for this. Let’s trade and do all the things we can to take advantage of this. And I just find that mind-boggling. And we are getting inundated with this on social media and other platforms and couching and prediction markets. And even now, again, Robinhood, which is supposed to be an investment platform, is pushing, hey, let’s trade your money. Let’s make sure we’re finding the right ways to get in and out. And I just want to acknowledge like this is really hard to do where today, like, we are just getting bombarded by this stuff every day.

Matt: Good point, Jake. And this is what we’ve talked about. Robbie’s just dying laughing on that one.

Jake: Crazy.

Matt: It is crazy. Yeah. Really simple question there or or or comment there and framework to use moving forward is just always question the source. Always. And and always go further into like what are they, what is their motive, and does that align with me? I think that’s really, really important to think about whenever you’re getting news or you’re getting like Just that email. It’s a perfect email, Jake. It’s like, what is Robin Hood’s motive? It’s to get you to trade on their platform. That is it, that is the antithesis. It is it is contrary to what your goal should be of building wealth. And again, it’s really difficult. But Rabih, let’s get you in here. You were laughing at that.

Rabih: No, because it reminded me of something. I don’t know if you guys go to the grocery store or you like order your groceries in house, but if you go to the grocery store, do you try to time it when it’s like you it’s not busy and you don’t have to wait a lot a lot in the queue, etc.? Like d do you guys do that?

Jake: I’m not that organized, Rabih. I

Matt: No,

Jake: am not that prepared.

Matt: I just go when I need stuff.

Jake: Yeah.

Matt: Or when I have time.

Rabih: Really? Like I try to time it very early in the morning or right before they close. So like the aisles are open. I can just grab whatever I want and I don’t have to wait. Especially Costco.

Matt: I’ll do that with Costco. I’ll do that with Costco. Yeah.

Rabih: my goodness.

Jake: Yeah.

Rabih: And I’m like, well, we do this as humans. We don’t want to like be stuck in a Costco parking lot for for an hour, etc. Well, it’s that same exact human reaction and behavior can is applied to markets. If you want to go and buy a stock, don’t do it when Everyone is there and everyone is shouting and prices are going up and down. Do it on when the store is kind of empty, when it’s like nothing is happening, the stock market is not moving. That is when you actually are buying, you know, when you find you’re clear minded to get the right opportunity, to get the new product that you’re gonna talk to everyone about, etc. So the that whole idea of just like you want to avoid the craziness when you know, like I don’t do Black Friday shopping. ‘Cause I can’t stand the the the the really the people

Matt: Jake loves it. Jake loves Black Friday. No.

Rabih: and and being in inside all of that chaos, because i I know it’s going to be a not a pleasant experience. Trying to trade when markets are volatile is the exact same thing as like trying to fight people for items on Black Friday.

Matt: Yeah. Yeah. Jake, what are your thoughts? Anything?

Jake: No, I other than it’s like I think our natural human reaction is to be active, right? And to do something at times like this. And I think that’s what we’re also fighting against when trying to be a good investor is we’re fighting somewhat against our own human nature. Yes,

Matt: Grasping for control. Yeah.

Jake: we’re fighting against our own human nature, which is hard where it’s like I feel like if things are breaking in the world and my portfolio’s going down, I need to do something about it, right? I gotta I gotta fix something. but oftentimes markets were bored in action. Right. Like Rabih, you were speaking to opportunity lies where other people aren’t, right, most of the time. And when you can be like the calm, level headed person where other people are freaking out, you can usually get some awesome investment returns in the long run by doing that.

Matt: Yeah, what does Napoleon say? true genius is being able to do nothing while everyone else is losing their minds.

Jake: Yeah.

Matt: That’s paraphrased. He said it much better, but it it’s true. It’s when you can or I think he says when you can do the average thing, when everyone else is losing their mind. I think it’s true. Like, and I and you’re right, Jake. In every other aspect of our life, for the most part, action usually leads to better results. And like consistent action usually leads to better results, but it’s not. That’s that’s opposite usually when it comes to investing. Most of the time it’s it’s not a set it and forget it, as we’ve talked about many, many times. And you know, we have podcasts on our philosophy and our approach to investing. But once the system is running, right, outside of tweaks and changes you’re gonna make along the way, that by the way, have nothing to do with anything happening in the news, you’re you’re gonna always make adjustments, of course. But once the system is running. It is just go live your life. Just enjoy your life.

Jake: This is our second podcast that we’re doing in Holy War Week BYU versus Utah football game. You Utah’s

Matt: I was trying to avoid it, Jake, but

Jake: Head football coach had a quote yesterday talking about the emotions of a rivalry game and how do you deal with that? And he said, Emotions do not win football games, but proper execution and good technique does. And I think that applies here, right? It was like emotions don’t win the investing in the wealth be wealth kind of building game, but like good technique. Proper execution, being smart and disciplined is what wins in the long run. Morgan Scaly. Yeah. Yeah.

Matt: Just shout out Morgan Scaly. He’s such a good, he’s just the man. He’s the man. Rabih, any so I I I want to get your thoughts as we wrap this up, both of you, about kind of a practical takeaway. Like kind of the what do I do with my hands? Like, okay, you know, I think we’ve an acknowledged and we’ll if we haven’t said it clearly, we’re going to. You cannot time the market. Just stop it. You cannot time it. That’s the that’s the short, hard truth. That you can’t. And by trying to do it, you will cause more destruction and be less likely to reach your goals, which in this sense is making work optional, right? Becoming financial independent, building after tax wealth, trying to time the market will always lead to a less a lesser likelihood, lower probability of achieving those goals. That’s just that is a fact. So with that said. Even if someone that people listening are like, Okay, cool, I believe you, but like what? Like okay, I’m I have to go like turn this podcast off and go live in the world. Any practical takeaways that you guys can share, or any just thoughts you have on on how people can give get help with this?

Jake: I’ll give one and then I’ll let Rabih go because he can finish and he’ll probably pack a bigger punch than I can at the end. Maybe one practical thing I would say, and this applies to a lot of personal finance, is try to avoid the extreme action, I would say. And oftentimes there’s like a middle ground that you can do to make yourself feel more comfortable. So in this scenario, I think like it is valid, again, as we talked about, valid to be scared and things like that. What if we said, okay, let’s not cash out your entire portfolio? What if because you want to do something? Can we take a small portion of it and move to bonds or cash or something to make you feel more safe? And we are taking some micro action that is helping ease your fears, but we’re not doing something that can be potentially very catastrophic and detrimental by doing the extreme. Let’s get out of the stock market. Can we take a small portion and do something like that there? Or can we look at this in chunks or over time? Can we set, like if you’re still uneasy three months from now, let’s meet again and talk about an action we can do. And so I think a practical thing would be let’s not try and fight our emotions as much as can we set like smaller things or microactions we can do to help ease our fears. And I think that could be helpful, even if it’s not the most optimal thing to do. I think like taking small, less aggressive, extreme actions can help sometimes in this scenario.

Matt: I like that. It’s really good. Rabih?

Rabih: Yeah. Definitely. if if you want something practical, I think a lot of time is that once you have an awareness of something, the problem solves itself. And if you are afraid about what is happening in the short term, the best thing to do is lo is to look on the long run. And that would do a you know, it’s a switch between your emotion reaction. I I had multiple charts for you, but I still want to share one more today. Because Matt is saying, yes, make sure you are not touching your portfolio right now and going and living your life. And he’s not saying it because he’s just telling you, hey, believe that the markets do well. He is telling you though that because we know the markets do well. And this chart, can you guys see it? This chart is the growth of a one dollar from nineteen twenty-six till twenty twenty five, color shaded. By who was in office, whether it was a Republican Congress and executive branch, a Democratic executive branch, or a mixed government type of stale. And you regardless of what period is governing the geopolitical risks and the economic risks, long term is you know the your your North Star. So l long term stocks are gonna be going up because Our standards of living are improving every single day. There are companies out there that are just people in them are just like us and you waking up every morning to go and do a good job and help the people around them. And that compounds at the level of a society, and that means that standards of living improve to everyone, and that means portfolios grow up for everyone. So if it is very hard on the short term to understand why you should refrain from overreacting or underreacting to a certain event, the long term kinda sets the right anchor to where you should be looking and why it is important to stay invested in the market rather than trying to time the market.

Matt: This is great, guys. And I I can’t help but just think again. We acknowledge our bias when we s when I say this, but I can’t help but just think, Jake, what you said earlier, how hard this is. It is hard and how much people just need help with this. Not everyone, right? There’s people out there that are disciplined that don’t that follow these things along the way and totally fine. But I I can’t help but just think this is the value of having someone in your corner. And whether it’s us, whether it’s someone out, like having a quality advisor in your corner is so much more than the X’s and O’s. It’s helping you stay in your seat when things get scary, right? Like having that person having you, Jake, when that person calls you, like I’m freaking out. It’s just there’s so much value there. So any other final words you guys wanna you wanna throw out there?

Jake: Feel very good.

Matt: This is great. If you’re still listening, you know, you’re one of the cool ones. We appreciate every every one of you. We hope it is valuable. again, if you want to talk to us, we are here to help. dentistadvisors.com. Click on the book free consultation button. If you’re lucky, you’ll get Jake or one of our other friendly advisors. We’re here to help all the dentists out there. So For now, Jake, Rabih, thanks for being here, sharing your words of wisdom. Everyone, thanks for listening. Till next time, take care. Bye-bye.

Keywords: market timing, investing behavior, stock market volatility, long-term investing, election-year returns, portfolio diversification, investor psychology

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