Financial advice from the things that aren’t said

July 29, 2022 by admin

Author’s note: This column was released in syndication on May 4. 2022

One of life’s truisms is that some things are better left unsaid.

In the investing world, however, some things are just never said at all. Not because silence is “the right thing to do,” but more because no matter how much someone might want to imply something, saying it out loud would be wrong.

I found proof of that this week as my podcast, “Money Life with Chuck Jaffe,” celebrated its tenth anniversary. There were previous iterations of my show on radio and in podcast form dating back 20 years, but the hour-long weekday version that debuted on April 30, 2012, has now done more than 2,500 episodes, most of them featuring four interviews.

In those nearly 10,000 interviews – featuring with thousands of unique guests – and exclusive of the many more conversations I have had with experts for the purpose of writing this column, you would think that I have heard everything by now.

But what struck me as the show embarked on its second decade were the things that I haven’t heard anyone say on-air. Ever.

I keep waiting and hoping – because the discussions would make for a good talk show – but I doubt I will find anyone who ever gives me the four following chestnuts with any conviction that they are true and right.

“The time to panic is NOW.” Whenever the market gets salty, the media is quick to apply the balm of an experienced financial planner or money manager saying, “This is no time to panic.”

They make that statement as if a good time to panic really exists, as if there is an actual point during a market frenzy when hysterical or irrational behavior is the right thing to do.

But even in the worst of stock market declines, the verbal panic button has never been pushed on my show, and never will be.

Whether it’s a stock-market decline or a big run on groceries before a winter storm, or any other nerve-wracking situation, panic is never good, so eliminate it from the conversation completely.

Don’t be caught by surprise or unaware; as an investor and consumer, if you are mindful of your situation and current conditions, you can face problems calmly and have better outcomes.

If ever you are tempted to panic, something about your plan is amiss.

“Individual investors do better on their own, without financial advisers.” There are lots of investors who do not need the services of a financial planner to reach their goals and hit their targets; a big percentage of my show’s audience is successful, happy, confident do-it-yourself investors.

Moreover, nothing a financial adviser will do for you is so complicated that you can’t figure it out on your own.

But the same can be said for plumbing and carpentry, and yet most people have no problems hiring an expert. What’s more, we all know people who have overestimated their home-improvement skills and wound up damaging their biggest investment, their home, in the process.

That fact that it is possible to do as well or better on your own doesn’t mean that everyone should take that route. Having written two books on choosing and working with financial advisers, there’s no denying the perils of hiring the wrong expert and trusting the wrong people.

But virtually every study shows that individuals who work with advisers are more confident and less stressed about money. They’re paying for emotional discipline – the ability to plot and stay the course – rather than raw returns, and the expense typically is worth it.

“How you invest is the primary determinant in reaching your goals.” The most confident money-manager in the world will tell you what they hope to deliver, but the investments are much less a determinant of your financial future than your savings.

That’s not to minimize the importance of good securities – the long bull market after the financial crisis of 2008 helped generations of investors play catch-up – but rather to maximize the importance of seeding those investments as richly as possible.

Everyone wants to get rich quick while putting little money at risk, but that’s the least successful investment plan ever. The best chance you have for reaching your financial goals is saving as much as you can for as long as you can, regardless of what is happening in the stock market.

“It’s an index-picker’s market.” You hear all the time that “It’s a stock-picker’s market,” implying that conditions are tough, so that good stock selection is needed to better results.

I hate that saying, because it’s always a stock-picker’s market. Superior stock selection is, well, superior.

It’s also incredibly hard to achieve, which gave rise to long-term index investing. These days, many index investors are “tactical investors,” not the classic buy-and-hold index pickers inspired by Vanguard Group chairman Jack Bogle to own the stock market, the bond market and to let it ride.

Today’s index investor holds a portfolio of index funds, each representing different sectors, slices, wedges and bites of markets, countries, industries, investment styles and ideas.

One thing many of those investors miss is that it’s easy to mess up a portfolio by moving money at the wrong time into an ETF covering the wrong area of the market. Bad index picking is as bad as lousy stock selections.

The index might be the better investing tool for the average person, but even the best tools don’t always produce great results in the hands of an amateur.

The bigger point is this; a true index investor following the teachings of a giant like Bogle is strapping in for the rollercoaster ride. They will experience ups and downs.

In markets like we have now, there will be some pain. It will be temporary, though that can still represent a long time. An “index-picker’s market” would be one where the advice is “Buckle up, this will be scary until you come out the other side.”

That’s usually the right advice; funny that no one seems to want to give it.

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Chuck Jaffe is a nationally syndicated financial columnist and the host of “Money Life with Chuck Jaffe.” You can reach him at itschuckjaffe@gmail.com and tune in at moneylifeshow.com.