Why Seasoned Investors Don’t Worry About Down Markets – Episode #322

With its ups and downs, the market is often compared to a rollercoaster. And just like the real thing, your stomach might drop when the market plunges. On this episode of the Dentist Money™ Show, Ryan and Matt look at the difference between corrections, bear markets, and crashes while discussing how to move past the worries that beset many investors during regular down periods.

 

---

 

Podcast Transcript

Ryan Isaac:
Hello everybody. Welcome back to another episode of the Dentist Money Show, brought to you by Dentist Advisors. Who else would bring you this show? Dentists Advisors is a no-commission fiduciary, comprehensive financial advisor just for dentists all over the country, just like you. Check us out at dentistadvisors.com, we’d love to chat with you. Today on the show, Matt and I are talking about market volatility and some of the really common questions that goes through people’s heads and the things they ask us.

Ryan Isaac:
And we wanted to share those with you, our dear listeners, to hopefully maybe ease some burdens, ease some stress and help you get on your way and be a happy person and have good returns in your life. That’s what we care about, that’s what we want for you, be happy, have good returns, carry on. Thanks for listening to the show. If you have any questions, you can post in our Dentist Advisors discussion group on Facebook, or you can go to dentistadvisors.com and click the “book free consultation” link and chat with us directly. We’d love to talk to you. Either way, thanks for being here, thanks for tuning in, and enjoy the show.

Announcer:
Consult an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money Show, where we help dentists make smart financial decisions and avoid the bad ones along the way. I am Ryan Isaac and I’m here, as I always am, with the guy that makes me smile every day, it’s the Hollywood mountain, Matt Mulcock. What’s up Matty, how are you doing?

Matt Mulcock:
Yo Ryan, good to be here as always.

Ryan Isaac:
What are you sipping on there, what do you got this afternoon?

Matt Mulcock:
I’m sipping on a little Rockstar Juiced.

Ryan Isaac:
Okay. Oh, the Juiced one.

Matt Mulcock:
I’m a Juiced guy. So here’s my thing. We talked about goals last time, on one of the previous podcasts, and yes, it is kind of in my mind, I need to get away from caffeine, but at the same time, I can’t tackle everything at once, right?

Ryan Isaac:
Yeah, it’s a lot, it’s heavy.

Matt Mulcock:
I’m trying to eat healthier, drink less, drink less caffeine. So I’m kind of like “Alright, I’m gonna take this a step at a time, I’m gonna be realistic.”

Ryan Isaac:
Yes.

Matt Mulcock:
So yes, I still occasionally enjoy a solid Rockstar Juiced.

Ryan Isaac:
You’re on the juice.

Matt Mulcock:
Also, you and I talked about this at the event we were just at together.

Ryan Isaac:
Hm-hmm.

Matt Mulcock:
I know for a fact it would be a lot healthier if I just transitioned fully to coffee.

Ryan Isaac:
Yeah.

Matt Mulcock:
But it is a very intimidating world.

Ryan Isaac:
The coffee world is just…

Matt Mulcock:
It’s a whole other world.

Ryan Isaac:
I don’t know how you step into it.

Matt Mulcock:
Other language.

Ryan Isaac:
Yeah, I mean, there’s just so many nuances to the coffee world. You just stay away. You’re just gonna look like an idiot, you’re gonna look stupid.

Matt Mulcock:
That’s basically what I do.

Ryan Isaac:
Yeah, you’re gonna… It’s just so intimidating, you’re like “What are you even… I’m gonna look like the biggest idiot ordering anything, so I’m just not gonna order anything.”

Matt Mulcock:
I know, I went to breakfast with my wife the other day and I got a Vanilla Latte.

Ryan Isaac:
Oh yeah, okay.

Matt Mulcock:
‘Cause that’s all I know. I’m like “What’s that? I don’t know, Vanilla Latte?” She scoffed at me.

Ryan Isaac:
That’s what I’m talking about.

Matt Mulcock:
She was like… I’m like, “Oh, I don’t know.” And I felt stupid. It was delicious, it was delightful.

Ryan Isaac:
So they just go pick up one of those 40 ounce cans with a thousand chemical names on the back. Just drink that instead. It’s all good.

Matt Mulcock:
That’s what I’m saying yeah, I can’t even pronounce anything that’s on here.

Ryan Isaac:
It’s all good.

Matt Mulcock:
But the things we will do to protect our ego and not look stupid, this is what I do.

Ryan Isaac:
Well, speaking of that, that’s a great segue.

Matt Mulcock:
Oh, we…

Ryan Isaac:
Protect our ego, not look stupid, maybe that has something to do with today. It drives it a little bit.

Matt Mulcock:
Yeah.

Ryan Isaac:
Yeah, so we’re gonna hit something. I feel like this is at least an annual conversation. Matt, how long have you been in this industry?

Matt Mulcock:
A decade. We’re gonna round up, basically a decade.

Ryan Isaac:
Call it a decade. Today’s topic is an, at least annual discussion, and always in the beginning of the year…

Matt Mulcock:
Always.

Ryan Isaac:
That’s where everyone’s predictions come in, right? Like how a year is gonna go. And it just never goes the way people think they’re gonna go. Here’s what I’ve learned. The market, we’re talking about the market today, and we’re gonna run through… What makes this special right now. It’s not even that special, honestly.

Matt Mulcock:
That’s the thing, it for some reason it feels, I feel like people are freaking out more about the market now, than in March of 2020, for whatever reason.

Ryan Isaac:
Yes. But that’s just what we do. This is what we’re trying to say is every year, it’s just things people do is like… We get used to things going straight up all the time, then if it takes a brief pause, everyone’s like, “Oh, here we go, this is it, this is the one I’ve been waiting for, this is the wipeout.”

Matt Mulcock:
Yep.

Ryan Isaac:
It’s like this is an annual exercise, and sometimes it gets bad, sometimes it doesn’t, and then regardless of what it does, it just continues where it was headed.

Matt Mulcock:
Keeps on chugging.

Ryan Isaac:
Yeah, so we’re gonna talk about this, and we’re gonna talk about this because during these times… Now, this is why I laugh. I was gonna say this. We are…

Matt Mulcock:
We’re not laughing at you, anyone.

Ryan Isaac:
No, no, but this is… We are January 27th, 2022. And this year, so if we’re saying that the beginning of all time was January 1st, 2022…

Matt Mulcock:
This year, aka. The last 27 days.

Ryan Isaac:
We’re gonna get to this, dude, this… We’re gonna get to this, this is a point where you wanna get across to people, but if we’re gonna just use January 1 as the starting point then we are, as of right now, S&P 500 data as of close of market today, we’re not even down 10%, which we’re also gonna talk about how often that happens. But for whatever reason, it’s combined with some other fears and some other unknowns and uncertainties, which when is it never combined with uncertainty and unknowns?

Matt Mulcock:
Right. Yep.

Ryan Isaac:
But it makes people wonder, and question, and worry, and that’s a totally normal thing to feel. And I guess we end up just fielding so many questions sometimes that I feel like we just gotta say this to the public out loud, so it can be helpful to more people than just the few people who are asking us privately. Fun times that we are in. But we’re gonna talk about this, we’re gonna talk about maybe, I don’t know, there might be five, maybe six, maybe four, whatever we choose.

Matt Mulcock:
Yep, whatever we… It’s our show, we do what we want.

Ryan Isaac:
Kind of like, I don’t know, really, really common questions when markets go down, and markets going down is a very subjective phrase because… You know. It’s not, it just doesn’t feel like that big of a deal right now, but it does to some people and then combined with whatever else is going on in the world or someone’s life, really? It can feel like a big deal. Matt, anything you want to say just in general before we jump in about getting these kinds of questions or comments or the way people feel, or like the way clients reach out or like, how does it work with you and your interactions?

Matt Mulcock:
Yeah. The first thing I’ll say here is that it’s totally normal to be concerned, and have concerns ’cause to your point, it’s your money. Our money is attached to every aspect of our life and impacts more than even just the dollars you see on the screen. There’s experiences, there’s feelings there’s emotions tied to it, there’s our future tied to it.

Matt Mulcock:
And not only that, but we live in an environment that is programmed to make us fearful about money in our life in general. That’s like the entire world we live in, media, everything, that’s what they’re designed to do. So that’s one of their biggest tactics, is using fear. So I say all that to say it is totally normal to feel nervous and to feel worried when you see the things that you’re seeing, and the reality is there are legit concerns right now. There’s a lot of these pressure points.

Ryan Isaac:
Don’t you feel like there always are?

Matt Mulcock:
There always are.

Ryan Isaac:
You said 10 years in this industry, and I mean I look back over my time and I’m like, I just can’t think of a time when there wasn’t something to be like, “Oh, this could be a concern,” because I swear when there’s bad news or markets are down, of course, that’s topic of conversation. But when they’re good, that’s still the topic of conversation.

Matt Mulcock:
Exactly.

Ryan Isaac:
Oh, this isn’t gonna last forever. Like this is coming, and this is coming, this is coming and it’s like I just don’t know of a time, there’s definitely no year that I’ve been in this industry where this discussion has not been the case, always something bad is coming or happening.

Matt Mulcock:
Yeah. It’s like our brains are wired to skepticism, the society is wired to skepticism. There’s just, there’s a lot of reasons for that, but I’m with you. We could probably rattle off the top of our head over the last 10 years. Year to year what were the pressure points within, tension points that were happening either geopolitically here in the US or in the markets, tons of different things.

Matt Mulcock:
I don’t know, there’s this thing called COVID that happened in 2020 that was the greatest global pandemic since the Spanish Flu. There was that in 2020 that everybody was freaking out about, again understandably so, and guess what, 2020 from a market perspective, was killer. If there was any year to be really nervous about what was gonna happen, like great depression level, is when the entire US economy gets mandated to be shut down.

Ryan Isaac:
Yeah. I mean the 2020 year. I’m just okay, well, I’m gonna get to this ’cause this is the point number one.

Matt Mulcock:
Yeah, we’ll…

Ryan Isaac:
Yeah. Go ahead. Were you gonna finish something though? Really, that’s okay.

Matt Mulcock:
Nope, let’s move on.

Ryan Isaac:
Point number one. Here’s how the conversation starts, markets are bad, right.

Matt Mulcock:
Yep, always.

Ryan Isaac:
Dear Ryan.

Matt Mulcock:
Every year.

Ryan Isaac:
I’m just…

Matt Mulcock:
Dear diary.

Ryan Isaac:
There’s an email that I read at night. “Dear Ryan, markets are bad. It’s so scary, things are going down quickly.” And we were saying this a few minutes ago. The question is really like, what’s the reference point? What are they bad compared to? Compared to what? And this is what feels so arbitrary. But this is the way our brains work and it kind of can trick us a little bit or get us into dangerous mindsets because we get worked up and then we can take action on these mindsets and that can be pretty devastating and consequential.

Ryan Isaac:
The question is like, “If markets are bad,” then the question is like, “Well compared to what?” So markets are bad compared to January 1st. December 31st. Sure, yes, markets have a lower value than they did three weeks ago, four weeks ago. That is true, that is a true statement. But look, let’s just give some context ’cause I feel like that answers a lot of questions. So for right now, I said this earlier, but as of today, we’re down, this is just S&P data, but we’ll talk about difference in…

Matt Mulcock:
And I was gonna, I was gonna try to pull up some other, yeah.

Ryan Isaac:
But as of today, for the year 2022, yeah, we’re down just under 10%, which we’ll talk about how often that happens. But if we went back, let’s just throw… We’re just throwing on arbitrary dates. So let’s go back to January 2021, if you don’t mind. January 20…

Matt Mulcock:
If you don’t mind, sir.

Ryan Isaac:
This same time last year 2021 to today, we’re up S&P 500, 14.23%. So if you look at what are US markets’ long-term average returns over very long periods of time and you’re looking in the 10, 11, 12 range, we’re still a couple points up just over the last year to date so that frame of reference. Let’s go back to the worst time in our recent memory, bottom of March, COVID. Wasn’t a good time, March 20th, March 16th, March 20th, 2020. We are up 87.71% since the bottom of the March pandemic.

Matt Mulcock:
It’s not bad.

Ryan Isaac:
And I just want to read something I woke up and read this morning and I was like… I was like, jeez, this is why I’m done listening to predictions, but I thought this like years ago. I woke up this morning, Washington Post article. The US economy grew 5.7% in 2021. Who cares? What does that really mean? Well, it was the fastest full-year clip since 1984. I was a wee 4-year-old, the last time the US economy…

Matt Mulcock:
I was a wee…

Ryan Isaac:
Nothing?

Matt Mulcock:
Somewhere in the ether, somewhere in the metaverse.

Ryan Isaac:
You were a wee nothing-year-old. I was a 4-year-old last time the US economy grew as much as it did in 2021 and you go, “Oh, yeah. Well 2021 had no problems.” There is no reason in 2021 to feel like the economy should be doing poorly or was there? This point number one. If you’re asking the same question, again we’re not like mocking, okay.

Ryan Isaac:
If you’re scared about when markets go down, that’s a totally normal feeling, but what we’re trying to deliver here is context. So markets are bad, markets are going down, like compared to what, and we just have to remember that. If you just pull up this chart, the same S&P chart, and I go back, even five years or 10 years, this thing looks like it’s just a straight climb, it’s a very steep staircase. [chuckle]

Matt Mulcock:
You zoom out far enough, markets just go up. That’s what they do.

Ryan Isaac:
It’s what they do. And then I read this article about how fast and how much our economy grew last year and it’s just like man, it is the most impossible thing ever, to just look around, read the news, listen to some friends, go on Facebook and then somehow try to call the shot for what the market and economy is gonna do, and then and then try to alter your behavior or your decision-making around that. I mean, that’s just the most impossible thing to do because I swear, it never goes according to what even the smartest people say is gonna happen.

Matt Mulcock:
Never.

Ryan Isaac:
And if there’s any proof of that, the last two years should be it.

Matt Mulcock:
Yeah.

Ryan Isaac:
The things we think are gonna happen don’t… Or they just don’t happen. They don’t have the effect that we think they’re going to have on the world.

Matt Mulcock:
That’s it, right? It’s like no one knows what’s gonna happen, A. B, the effect of what those…

Ryan Isaac:
The effect.

Matt Mulcock:
The effect of those things, you definitely don’t know what’s gonna happen.

Ryan Isaac:
Yeah, I think that’s a big one.

Matt Mulcock:
Again, you think of 2020 and all of the talk and rhetoric and media headlines around what COVID was gonna do to the US. I mean, here’s…

Ryan Isaac:
And did. And did to the US.

Matt Mulcock:
And did, right? For sure.

Ryan Isaac:
Oh yeah, for sure.

Matt Mulcock:
It absolutely did. And we’re not diminishing the seriousness of what happened, not at all.

Ryan Isaac:
And still going on.

Matt Mulcock:
And still happening. And the impact it’s had on many, many people. But just let’s use it… Let’s get specific to dentistry.

Ryan Isaac:
Yeah.

Matt Mulcock:
March of 2020 was the hardest month of my career. I stick with that, not even close. Because of the fear of the unknown. How many times I had to tell somebody, “I don’t know” on a phone call.

Ryan Isaac:
Oh yeah.

Matt Mulcock:
I mean, working long days, stressed out of my mind. Again, in that moment, a lot of us… We talked about this, Ryan. We talked about this internally. We had no clue what was gonna happen, and it…

Ryan Isaac:
Our whole client base shut their business down.

Matt Mulcock:
Shut down.

Ryan Isaac:
Indefinitely. Oh yeah.

Matt Mulcock:
I mean, we were talking to clients, yeah, shutting their whole… A lot of states, they were being required to shut down.

Ryan Isaac:
Yeah.

Matt Mulcock:
A lot of unknowns. So at that moment, we didn’t know what was gonna happen from there. But guess what? The exact opposite thing happened for most dentists when you fast forward through even at the end of 2020.

Ryan Isaac:
Crazy. Crazy.

Matt Mulcock:
They ended up in better positions. I’m not gonna say every dentist, but most dentists we talked to ended up in better financial positions at the end of 2020 than when they started.

Ryan Isaac:
I’m glad that word got worked out of this conversation, the “effect” of things. And so this kinda ended up as two points, but I think the point… If this were a private conversation. Someone’s reaching out saying, “Markets are down. I’m really scared. What do we do?” There’s the two points. It’s like, “Compared to when?” would be one good question to ask. And then how arbitrary is this date range that we’re fixated on? If markets are bad in the last four weeks, why are we fixated on the markets in the last four weeks? Unless you put money into something, and you had a four-week time horizon, and then you’re disappointed.

Matt Mulcock:
Yeah. You needed money back out after a month.

Ryan Isaac:
Yeah.

Matt Mulcock:
First of all, you shouldn’t be investing that money anyway.

Ryan Isaac:
Yeah, unless it… I was gonna make a joke. I’m not gonna do any crypto jokes right now. But my crypto’s getting crushed too, so I don’t know.

Matt Mulcock:
Yeah. I mean, right now the market is not really… It’s going after all asset classes, right? It is non-discriminatory right now.

Ryan Isaac:
No respect. Yeah, it doesn’t care. But yeah, so I would just… Let’s ask a question, “Why are we fixated on a really small specific stretch of time as like the market’s bad in the last four weeks?” Why aren’t we talking about the market’s great in the last 12 months, or five years or 10 years? Why aren’t we talking about that?

Ryan Isaac:
Number two, would be just kind of this theme that repeats itself every year. There’s predictions. There’s things we think we’ll see happen. Some of them do, but the effect that it has on things are totally unpredictable. And trying to base a life-long investment strategy on those things is just… It’s nuts. You’ll burn yourself out. And you won’t get good returns. That’s my prediction.

Matt Mulcock:
: Yeah.

Ryan Isaac:
Is it bold?

Matt Mulcock:
No, that is 100% correct. If you’re trying to base a long-term… Your long-term strategy and wealth-building plan on the short-term whims and movements of the market, and you’re reacting to those things, you will absolutely be unsuccessful.

Ryan Isaac:
Yeah. It’s tough. Point number two, if someone’s asking this question. Again, these are just… These are like private conversations we’re having, and now we’re having them publicly because I think… I hope it’s helpful. I think it is.

Matt Mulcock:
Yeah. Every person that’s bringing it up to us, there’s 10 or 20 or more that are thinking it.

Ryan Isaac:
Oh, way more, for sure.

Matt Mulcock:
A hundred, maybe. Yeah, a thousand.

Ryan Isaac:
Millions.

Matt Mulcock:
Let’s say it was millions.

Ryan Isaac:
There are billions of people, Matt.

Matt Mulcock:
There are billions of people that are thinking this right now.

Ryan Isaac:
Well, and what do we hope from all this conversation? We’re hoping, 40 minutes from now, if you feel this way. I want you to be a long-term investor, and I want your behavior to not affect your returns ’cause it doesn’t have to. It’s under your control. And I want you to just move on. Don’t worry about stock. Worry about something else in life. Worry about something else.

Matt Mulcock:
Worry about something that you can control.

Ryan Isaac:
Yeah, that’s like… Yeah, that’s in your control and probably more meaningful to you short-term, like what taco place you’re gonna go to tonight.

Matt Mulcock:
Oh, yeah. That’s what I’m talking about.

Ryan Isaac:
That has deep consequences, today, in your life. So, anyway.

Matt Mulcock:
Exactly.

Ryan Isaac:
Point number two, or three, I don’t know where we’re at. It doesn’t really matter.

Matt Mulcock:
Some point we’re trying to make.

Ryan Isaac:
This comes up from people who have less experience investing in markets, so this totally makes sense. Any time you do something new in life and something feels a little out of the ordinary, you ask yourself, “Is this the norm? Or is there something wrong? Should I be here right now?”

Matt Mulcock:
“Is this a me problem?”

Ryan Isaac:
Hey, I think about this in times, as a new surfer, when I paddle out to waves that are above my pay grade, which are a lot of them.

Matt Mulcock:
You’re like, “Every wave.”

Ryan Isaac:
And you do. When you don’t have experience with a certain environment, your brain tends to just see things that are outside of the pattern or expectation as a problem. And again, that’s probably our old cave people brains trying to protect us. So it’s normal to look at something and be like, “Oh, this feels like abnormal. Should I be here right now? Or am I in a dangerous spot?” I ask myself that when I’m paddling. I’m like, “I don’t think I should be here. I should just go back in.” And people ask that about the markets, like “Is this normal?” So let’s just talk real quick. We’ve brought this up a lot before. Let’s talk about the frequency of how often and how much markets go down. Again, this will be US market data, and this is data from the last century of information. Every 11 months, on average… It doesn’t mean like clockwork. But on average, every 11 months there is a 10% drop in US markets. Well, we’re in it right now, right?

Matt Mulcock:
Yeah, I was gonna say, “Once a year.” Yeah.

Ryan Isaac:
Once a year. I mean, it’s literally once a year on average for the last century in US markets. That’s called a correction. Which is another funny thing, like media puts labels on things that sound scary that are actually really common. You know?

Matt Mulcock:
Absolutely.

Ryan Isaac:
Like how often, Matt, do you hear the conversation or read the headline, “We’re due for a correction”?

Matt Mulcock:
Yes. Well, and that’s the whole point, right? Like you were saying before, it doesn’t matter what market environment we’re in. Our mind is always trained to skepticism…

Ryan Isaac:
Always, yeah.

Matt Mulcock:
Because when things are going really well…

Ryan Isaac:
You’re like, “When is this gonna end?”

Matt Mulcock:
Like last year. Last year we had one of the lowest volatility years on record, ever, in the markets. And a fantastic return, right?

Ryan Isaac:
Yep.

Matt Mulcock:
But that is also gonna tilt you towards negativity because, just like you said, it’s we’re due… Then it’s just… Whatever narrative we wanna tell ourselves. Well, it’s the calm before the storm… It’s we’re due for this.

Ryan Isaac:
Yeah, and so it’s…

Matt Mulcock:
It’s all generated by the media.

Ryan Isaac:
So it’s every year… So it’s every year.

Matt Mulcock:
Yep, every year.

Ryan Isaac:
The good years, the bad years, I mean it’s always…

Matt Mulcock:
Doesn’t matter.

Ryan Isaac:
What we’re looking for.

Matt Mulcock:
Yep.

Ryan Isaac:
So if you read something, and… If you read something that says, “We’re due for a correction… ” This is why I hate that word, correction.

Matt Mulcock:
Yeah. We are.

Ryan Isaac:
A correction makes it sound like it’s a complete reversal.

Matt Mulcock:
Yeah.

Ryan Isaac:
Right, like, “Oh, we’re going back to the Stone Age,” guys.

Matt Mulcock:
Yeah.

Ryan Isaac:
Correction’s coming. So correction means a 10% decline in markets… And again, when we’re talking about declines, here’s another thing to keep in mind, these are not permanent losses of capital if you don’t do anything, these are fluctuations, like hate to break it to everyone, but if there was a market for your practice that had millions and millions of people bidding against it every day, you would see price fluctuations in your practice every time someone cancels or someone quits, or there’s a flood, or…

Matt Mulcock:
Or you had to report earnings.

Ryan Isaac:
Or report your profitability, and you got to publicly post your P and L every quarter. And if there was a market for it…

Matt Mulcock:
No, not only that, not only that. If you had to post your profitability margins or your profitability and revenue and everything, every quarter after a group of people predicted what your revenue and profitability were gonna be.

Ryan Isaac:
Yes.

Matt Mulcock:
And even if you had a positive profitability in revenue, quarter, but these random people…

Ryan Isaac:
Fell short, missed it.

Matt Mulcock:
Just predicted you’d be a little bit higher…

Ryan Isaac:
Yeah.

Matt Mulcock:
All of a sudden the value your practice goes down, that’s how arbitrary this is sometimes.

Ryan Isaac:
This giant group of multiple PhD rocket scientists work 80 hours a week studying your business, and they predict you’re gonna hit a 47% profitability this quarter and you hit 46.

Matt Mulcock:
Boom, you’re done for it.

Ryan Isaac:
Your value is going down.

Matt Mulcock:
Correction time, people.

Ryan Isaac:
You’re headed for a correction.

Matt Mulcock:
Yeah.

Ryan Isaac:
It’s wild, so. Correction.

Matt Mulcock:
Sell, sell, sell.

Ryan Isaac:
10% every 11 months. So when you see a correction or you hear about it, just know that this is an annual event, it is like a Christmas, except not as cool.

Matt Mulcock:
I was going to say, happy holidays, happy correction.

Ryan Isaac:
Yeah. Number two on the list here would be a 20% drop, they call these the bear markets.

Matt Mulcock:
The bear, so scary.

Ryan Isaac:
It does, it is a bear, I mean a 20% decline in the…

Matt Mulcock:
That’s a bear.

Ryan Isaac:
In values, if you had to pull your money out that day would be… That would be scary. But a 20% decline is called a bear market. On average, I think the average bear market in the US economy, is… It’s like just under a year and a half, I think it’s like 14 months is the average length of a bear market.

Matt Mulcock:
Of how long it lasts.

Ryan Isaac:
How long it lasts to get back to where it was.

Matt Mulcock:
Yeah, yeah.

Ryan Isaac:
It’s an average, they’ve been much shorter and they’ve been a little bit longer too… That happens about every four to five years. That’s the average. So… If you’re 30 and you’re gonna invest till your dead, hopefully it’s a long life, you’re gonna see quite a few bear markets, you’re gonna see a correction every year, and a bear market every handful of years. We’ll see what we would call a crash. It would be defined as something like a 30% or greater drop, you’ll see that about once a decade. And what’s crazy is March, 2020, we saw that number, more than that number… It was a big number in March 2020, although it was over in like three weeks, so…

Matt Mulcock:
It was the fastest bear market we’ve ever seen.

Ryan Isaac:
Just crazy, but the… We saw that in 2020, and the last time we saw a market drop that size was about 10 years previous.

Matt Mulcock:
Yep.

Ryan Isaac:
So these are how the averages… How they play out. Here’s… This wasn’t on my list, but I wanna bring this up. We talk about this all the time as advisors, the longer you’ve been an investor, like you’ve been buying… Let’s say you have a monthly savings plan and you’re buying shares of your portfolio every single month, and you’ve done that for years and years, maybe decades, the… Just because the market drops 20% does not mean your portfolio drops to negative returns. So what I’m saying, if you’ve had a portfolio that’s been around for quite a while, it declines in value, but it still has a built-up positive return over those years, it’s like the market right now, we’re down 10% since the start of the year, but it’s got a… Since it began.

Matt Mulcock:
Yep.

Ryan Isaac:
It’s got a lot of built-in gain, right?

Matt Mulcock:
Exactly.

Ryan Isaac:
So the longer you stick with it…

Matt Mulcock:
A little bit of a buffer there.

Ryan Isaac:
Yeah, there’s a buffer. So like… Look, shares of mutual funds that you purchased 10 years ago in today’s decline, they still have tons of gain in them, shares of mutual fund you bought in December, they did decline in value ’cause they’re new, so the timeframe here, going back to what we’re saying…

Matt Mulcock:
They’re just fresh little puppies just figuring out life.

Ryan Isaac:
Just… They’re fragile, alright.

Matt Mulcock:
They’re fragile.

Ryan Isaac:
Just give ’em time.

Matt Mulcock:
It’s like my two-year-old who struggles walking upstairs still, she just can’t find her balance.

Ryan Isaac:
They don’t know. They’re fragile.

Matt Mulcock:
She’s new, she’s new at life.

Ryan Isaac:
So yeah, so keep that in mind that the longer you are an investor and that you stick to something, the less these things are actually going to affect you. And even if the day you retire, we have one of these crashes, and you… But if you’ve been an investor for a very long time, you’re gonna still have a lot of gain that’s built in there, it’s just the most recent stuff you put in there, will take that hit, but guess what that does, that means when you need money out, you have options to do some tax loss harvesting or you can choose… Yeah, you choose to take a loss on purpose for tax purposes, or you can say, I wanna let those fragile little ones keep growing and I’m gonna sell some older ones that have gains in them and I’m gonna pay the capital gains taxes, so you just have more options when it’s gone a long time.

Matt Mulcock:
Well, and hopefully, if you are nearing retirement, you’re adjusting your exposure to risk and your overall plan based on things that are personal to your life, like your timeframe…

Ryan Isaac:
Yep.

Matt Mulcock:
And you’re not adjusting those things to outside forces that you can’t control like the market. So if you’re 70 years old and getting ready to retire and you’re nervous about market volatility, you should be, but you also shouldn’t be fully exposed to the equity markets if you’re 70 and trying to retire.

Matt Mulcock:
On the dentist money show, we teach Dentists how to make smart financial decisions.

Ryan Isaac:
You’re correct.

Matt Mulcock:
Is that all it takes, Ryan, to make smart financial decisions? Listening to our show?

Ryan Isaac:
Matt, it’s a good first step. But to put your financial future on the fast track, the next smart decision is to go to dentistadvisors.com, what you do there is you click on the book free consultation button right in the middle of the home screen, and then you schedule a time to talk with one of our very friendly dental specific financial advisors today.

Ryan Isaac:
The next thing we wanted to talk about was the benefits… And you’re kind of been alluding to this. I was gonna talk about how diversification works during these times, ’cause it’s kind of fascinating, but let’s first start out with what you were just talking about, which is diversifying between stocks and bonds, basically, building a portfolio that is either more aggressive or more conservative, and so again, as Matt is pointing to, you will probably have different portfolios at different points in your life based on your goals and your timeframe, but it’s also… It’s very subjective. A retired person with like a 40 multiple of their annual spending, they could afford to have a super aggressive portfolio.

Matt Mulcock:
I would say that person probably doesn’t need anything that’s…

Ryan Isaac:
Yeah.

Matt Mulcock:
Like bonds or anything conservative.

Ryan Isaac:
You don’t have to… That’s a funny position to be in too… We talk about all the time like if you don’t need to take the risk, that means you also can…

Matt Mulcock:
Yeah.

Ryan Isaac:
If you want to, right? So it’s like personality-driven, but someone who doesn’t have quite that net worth, and most people will probably have an adjusted different type of portfolio heading into retirement years when you’re about to spend the money than you do when you’re 30 years old. But it’s very personal and it’s very nuanced, and it has so much to do with the rest of your net worth and your spending and where the money is coming from, and how it will be taxed and all that kind of stuff. So number one is having the right appropriate amount of risk for your age and time frame is crucial number one point to building a portfolio, and if you’re wondering if you’ve done that right, and maybe you’re scared if you’ve done that right, that’s a fair question. That’s a really good question during any time of any market cycle, but to wonder, “Am I taking the right amount of risk in my portfolio,” that’s a great question to ask, and that’s a maybe a great starting point to say like, “I need someone to help me guide me through this,” so I’m glad you brought that up, Matt. About risk there, So I was gonna say diversification, what did we learn Matt? We just did our… We… Every quarter, we have a client, like a client only webinar, we kinda go through some stuff, private only to clients…

Matt Mulcock:
Private only.

Ryan Isaac:
Your eyes only, clients.

Matt Mulcock:
That was good never mind, I’m not gonna say what I was gonna say.

Ryan Isaac:
Let’s just move on. Matt, what did we learn? We showed… It was kind of cool because we showed Q4 market returns from all over the world, the portfolios we build for people are globally diversified, so we all own things from markets all over the world, but we showed some data from Q4 and then we showed data from January ’22, how this year’s starting out. What did you see there? That was kind of interesting.

Matt Mulcock:
Yeah, had completely flip. So yeah, we showed the different kinds of sectors of the globe, US, then we showed emerging foreign developed real estate and then the fixed bonds, fixed income and Q4… I don’t have the numbers in front of me, but from memory, just kind of high level numbers, Q4 of last year, the US market was up about 9% just in Q4 of 2021, while emerging markets in that same timeframe, Q4 of last year was down somewhere in the range of two and a half-ish percent.

Ryan Isaac:
Yeah negative.

Matt Mulcock:
3% something like that.

Ryan Isaac:
A spread of 11 points.

Matt Mulcock:
Yeah, it was like a nine or 10, something like that. Then, well, up to when we did the webinar, the spread had completely flipped, so the US… Again, this data is a little bit stale by a few days, but the US was down at that point about 6%, while emerging markets at the time was actually up in the first few weeks of 2021, up by like two or 3%. So it was actually a flip.

Ryan Isaac:
The spread flipped, yeah.

Matt Mulcock:
The spread completely flipped from 8%… 9% in favor of US to 8 or 9% in favor of emerging markets.

Ryan Isaac:
You’ll always hate something and love something in your portfolio, you know, like when we did that client webinar, you were like, “Oh, I love my emerging”, that’s what… We should… We should ratchet up my emerging exposure.

Matt Mulcock:
Lets put more there.

Ryan Isaac:
That’s what people do though, they’re like, “Oh, this quarter US could get killed, let’s get rid of some US stuff and let’s go heavier into emerging and then we’ll switch it like… Don’t do that.

Matt Mulcock:
Yeah.

Ryan Isaac:
But that’s what diversification is, it’s owning all of it so that you’re capturing the full experience at all times, and you’re not having to try to play the game of when, which things will do… What things are gonna do, So.

Matt Mulcock:
You know what’s funny, I had a client calling me recently that said, another advisor in the conversation they were having said something along the lines of, “If your advisor, referring to us, if your advisor is diversifying, or beliefs in diversification, it means they’re admitting they don’t know what’s gonna happen in the future.”

Ryan Isaac:
Yeah, funny you mentioned that.

Matt Mulcock:
I was like…

Ryan Isaac:
I don’t…

Matt Mulcock:
And yeah, that’s exactly what I’m saying.

Ryan Isaac:
That’s the beauty of that thing.

Matt Mulcock:
Like weird I’m telling you I don’t know what’s gonna happen in the future… Exactly, I don’t have an ego. I don’t know what’s gonna happen.

Ryan Isaac:
I mean, that’s why it exists and unless the world ends and 16000 publicly traded companies that we interact with on a daily basis to survive now, unless they all just go out of business one day, they’ll do what they continue to do and you can participate in that upside, you can get as an investor, those long-term returns, they’re there for you, you can take them, and that’s all we’re trying to say it’s like…

Matt Mulcock:
They’re there for the taking…

Ryan Isaac:
What’s the path to least resistance so that you can actually grasp those, and just snatch them up, get those returns like while you’re not having to spend days and nights worrying about that stuff, spend your energy stressing about your business and your profitability and your P and L and your people and your team, and then your family in your life and your hobbies and all that stuff, but not on the stock market, we’re just trying to give you a path to not have to worry about it and actually get those long-term returns that are so good. Matt, there’s a question that comes in during these times, usually it’s newer investors, again, it’s people, who just haven’t had the experience to know what this feels like. The question is, should I stop saving while the market’s going down and just wait… What say ye? Matt Mulcock.

Matt Mulcock:
No.

Ryan Isaac:
Alright. Next question. Next question.

Matt Mulcock:
No. That’s the short answer.

Ryan Isaac:
Yeah, that is a short answer, it’s only two microseconds, yeah.

Matt Mulcock:
That’s a short answer. It’s just, no.

Ryan Isaac:
One word, two letters, yeah, it’s…

Matt Mulcock:
Yeah, exactly.

Ryan Isaac:
Don’t stop saving. Yeah.

Matt Mulcock:
No, I mean the longer answer there… So yeah, the answer is no, but what I’d really ask that person… And this comes up, this has come up even recently is, “Okay, tell me why? Give me a sense of why you’re wanting to stop saving?

Ryan Isaac:
Yeah, are you struggling with cash flow?

Matt Mulcock:
Yeah, exactly. Yeah.

Ryan Isaac:
Or do you need to buy something sometime soon? Those are good reasons.

Matt Mulcock:
Yeah. Do you have future things that you’re trying to buy or new projects in the need practice?

Ryan Isaac:
Yeah, the business needs cash, yeah totally.

Matt Mulcock:
Yeah, business needs cash. You’re trying to upgrade your house. And if they answer no, no, no, no to all those things then why would you stop saving? In fact, It’s… I had this conversation this morning with a client, it’s actually the exact opposite of what you want to do. That’s the answer. Right now, you’re nervous ’cause the market has dropped 6-7%, and there’s a lot of these media headlines for sure, scary, these are the times that you want to keep saving, in fact, I would ratchet it up…

Ryan Isaac:
Yeah, if you can.

Matt Mulcock:
As far if you can, and actually be ratcheting up your savings drafts in times of turmoil.

Ryan Isaac:
Well, it’s cheaper than last month.

Matt Mulcock:
Exactly. It’s funny that the stock market goes on sale, it’s the only sale people don’t like.

Ryan Isaac:
It’s the only thing that we don’t wanna buy on sale. And it plays out. Tons of people think this.

Matt Mulcock:
Yes.

Ryan Isaac:
It must be just a really natural reaction, but it’s like saying like, “Hey… Anything… Southwest is having a sale on their flights right now.” “Nah, I’m gonna wait ’till they’re full price again.” “Okay, alright.”

Matt Mulcock:
There are Instagram accounts and these social media accounts dedicated to you… Google flight alerts.

Ryan Isaac:
Yeah, yeah, cheap flights, sales, discount coupons.

Matt Mulcock:
For you tracking flights that drop to 50% whatever, yeah, discount, but you don’t do the same thing with stocks when you’ve got free cash to be putting in.

Ryan Isaac:
Yeah, we do it with real estate.

Matt Mulcock:
Everything.

Ryan Isaac:
We do it with debt. And we buy cheap debt when it’s cheap. We buy dental practices when they’re on sale because of one reason or another, but yeah, the stock market is… It’s the weirdest, emotional experience for people, because it is the single thing that nobody wants to buy when it’s cheap. But that is how you get… You don’t get long-term returns by only buying when it’s expensive, that’s what dollar cost averaging, that’s why being a saver, a monthly saver, just an automated saver for years and years, that’s why it pays off because sometimes you’re buying really cheap, sometimes you’re buying really expensive and then a lot of times you’re buying right in the middle, and that’s how average returns work.

Ryan Isaac:
That’s how they work. The last one I had on my list was, this is another common one. “Should we wait until the market drops X percent?” I hear that all the time. And I think, hopefully, everything we’ve said up to this point would illustrate how difficult that is to do, because I think this all the time when I’m in the ocean. The ocean doesn’t really give a crap about who’s in it.

Matt Mulcock:
No.

Ryan Isaac:
It doesn’t really matter how smart you are, how good you are at something, how rich you are, how young you are, it doesn’t matter.

Matt Mulcock:
It’s an equal opportunist killer is what the ocean is.

Ryan Isaac:
It’s gonna toss you around if it wants to, and it won’t if it doesn’t want to. The market does not care at all what we’ve predicted, what we expect or what we think should happen based on X, Y and Z, and waiting until there’s a certain arbitrary number… And it’s always interesting to me, it’s always 10 or 15 or 20. [chuckle] It’s never nine.

Matt Mulcock:
Should I wait till it drops to 8.7%?

Ryan Isaac:
Someone just asked me if they can wait till it’s 13 and not 15 or 10 but… Look, that makes… But it’s funny though. Think about it it’s like, they’re asking the question, “I wanna buy this when it’s cheap.” Well, if it’s down nine right now, why are we waiting till it’s down… It might… What I’m saying is it doesn’t have to go down anymore. Just because it’s been a bad month, it can reverse on itself tomorrow morning and not look back for another five years. The other thing though too, again, we’ve said this a lot, is when people say market, “I’m gonna wait till the market’s down 10.” Well, your portfolio owns like four markets. So…

0:37:35.3 MM: Or more, yeah.

Ryan Isaac:
Or more. Global.

Matt Mulcock:
Markets within markets, its inception market style.

Ryan Isaac:
Yeah. So it’s kind of like… I think you get the point. We’re just really encouraging you to have the type of behavior that not only will get you long-term returns the kind you want out of this asset class, but also lower your stress levels and your worry levels and let you focus that on something else in your life that is worthy of your worry. There’s things that are worthy of your worry, and the stock market just isn’t one of them, in my opinion.

Matt Mulcock:
How do I retain my staff? What plan am I putting in place for that?

Ryan Isaac:
Those are worthy of your stress levels.

Matt Mulcock:
Yes.

Ryan Isaac:
Because you control them and they’re in your power and you can do something about those things. And…

Matt Mulcock:
And here’s the thing, when there’s market volatility like we’re seeing right now, and most likely this will continue, who knows for how long, but there’s no reason to believe it won’t for a period of time, ’cause that’s the whole cost of investing, is sustaining these bouts of volatility, but how about at these times your mindset shifts from, “Should I get out?” or “Should I be turning off my savings drafts or do something different?” To “How do I make more money to put more money in this thing?” Because now things are on sale. How do I…

Ryan Isaac:
Yeah, increase your profitability 2% this year and save more.

Matt Mulcock:
Yap, so I can put more money into this.

Ryan Isaac:
Yeah. If we have a whole bad year ahead of us, which we totally can, again, it doesn’t have to go up, it doesn’t have to go down, it could just sit where it’s at. Who knows, but go increase your profitability 1% this year.

Matt Mulcock:
Yeah. These moments of the market coming down and having these corrections or bear markets, these are not obstacles to building wealth, they are opportunities, this is where money is made.

Ryan Isaac:
Well we’re ending with that. Thanks for everyone tuning in and listening to those words of wisdom as we close this episode. We appreciate you listening and we hope this is helpful, we really do. And if you have any questions for us, you can go to the Dentist Advisors discussion group on Facebook, post a question, we’ll post an answer, we’ll probably respond to it on here. And yeah, we will.

Matt Mulcock:
We will. We’ll give you a shoutout?

Ryan Isaac:
Yeah, we will if you want one, and if you wanna just chat with us directly, go to dentistadvisors.com, click on the book free consultation link, and we’d love to chat with you.

Matt Mulcock:
How about this? If you disagree with us, also post it on Facebook, we accept that as well. We love all opinions.

Ryan Isaac:
We’ll take it. We’ll take it. Live your life, love it. Live, laugh and love people.

Matt Mulcock:
Just live, that’s the point.

Ryan Isaac:
We are gonna re-title this whole episode, there’s only…

Matt Mulcock:
Just live, laugh, love.

Ryan Isaac:
Three points to the success in the market, live, laugh, and love, there you go. Thanks for coming to our TED Talk. Thank you everyone. Thanks Matt we’ll catch you on next…

Matt Mulcock:
Thanks Ryan.

Ryan Isaac:
Next time on another episode of Dentist Money show. Take care and bye bye.

Investing