Ep. 134 – How To Have Peace Of Mind During Troubled Times

As the new Covid variant “Omicron” starts to spread like wildfire, are you protected enough? Can you manage that bad news and still maintain your peace of mind?

We often do the asset allocation/buy and hold strategy because that is what was introduced to us, and we don’t know any better. Achieving your peace of mind means that your investment’s risk is being actively managed at any point in the market using real data, and you’re not in danger of losing any significant amounts of money.

In this episode of the Secure Your Retirement podcast, we talk about your peace of mind during a market fall and how you can achieve it by actively managing your assets. We also explain the difference between a data-driven investor and an emotional-driven investor.

In this episode, find out:

  • Our goal is not perfection, but your peace of mind, a decent rate of return, and for you to lose less money.
  • The common buy and hold/asset allocation strategy and how it can be significantly affected by a market fall.  
  • How we actively manage the markets with good risk management.
  • How we protect our clients against significant loss during a crisis by use of real data rather than our emotions.
  • The feedback we got from our clients on how we handled their investments during last year’s market fall.
  • For more information about peace of mind read our book Secure Your Retirement plus other resources.

Tweetable Quotes:

  • “Our main goal is peace of mind and to make a decent rate of return and not lose significant amounts of money.”– Radon Stancil
  • “Our clients and ourselves feel so comfortable with this active approach because we don’t have to know what’s going to happen tomorrow, we’re going to react based of what’s happening today.”– Murs Tariq


If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the Full Transcript:

Radon:Welcome everyone to our retirement in action. Today, we’re going to be talking about a topic that you’ve been hearing about, wondering about, and we’re going to tie it to the portfolio. And I think there’s probably a couple different ways that people want to say this, but we’re going to call it Omicron, pretty sure that’s how we say it. Is that how you say it Murs?  
Murs Tariq:I’m going to say it Omicron, because I just don’t know yet.  
Radon:I was listening to a news station. They actually went through that. And some I’ll say Omicron and you say?  
Murs Tariq:Omicron, and then we’ll have the entire audience covered.  
Radon:Okay. We’ll probably get all kinds of emails off of this one to tell us exactly why we’re saying it wrong. Okay. So let’s talk about it. And I want to give it context, because this is the context of the conversation. Whether or not this is a variant that gives us more difficulties from a health perspective, obviously, Murs and I, are not of any kind of expertise to help in that area. What we are going to be talking to you about though, is the concept of how do you deal with this kind of news and then put your emotions in place when it comes to how you invest in the stock market or the bond market or any investment that you have?  
 Because instantly when we start hearing stuff on the news about a new variant, and we hear about shutdowns happening in countries, when they talk about not allowing travel to go like it was. And we thought, “Man, everybody’s getting vaccines. This looks like we’re getting back to normal.” And now we get this kind of news, and maybe we do end up continuing to be normal, but it gives anxiety as to what should I do. And then, you have a couple days, few days of maybe stock market volatility and you’re just not resting. And the name of this particular podcast is Secure Your Retirement. That means make it safe.  
 And then Murs and I run a financial planning firm called Peace of Mind Retirement Strategies or Peace of Mind Wealth Management. Good Lord. [crosstalk]. I get all these things, Peace of Mind Wealth Management. And we go through this idea of saying, how do we help people have peace of mind? And so, we want to talk about how we think or how we believe when it comes to having a good investment structure, a structure that allows you to deal with just about anything that can happen and not feel that stress.  
 I will tell you that in March, February of 2020, as well as we are recording this, our phones are not ringing off the hook. Why? Because our clients know that we already have a strategy in place to handle certain things within the market. And so that’s what we want to talk a little bit about. And we’ve done some episodes around this, but we believe that this is a topic that probably is giving people stress. So I think if we could, Murs, can you come take us through maybe, this idea of a concept, and by the way, I just want to say this before we explain it, we are not, so make sure you make a note of this, we are not saying that what we do is perfect.  
 We’re not saying that this particular concept is perfect. We’re not saying it won’t have some issues from here to there. But our main goal is one thing, peace of mind, and to make a decent rate of return, and not lose significant amounts of money. And so that’s the goal. We are not telling you that we can beat the market. We’re not telling you that we’re going to be able to do all kinds of things. What we’re saying is, “Hey, we have a way. There’s a couple of ways that people deal with risk.” So I think, first of all, Murs, can you just give us, again, the overall concept of maybe how maybe people have been trained for decades on what they’ve done to mitigate risk. And then we’ll compare that with maybe what we teach.  
Murs Tariq:Yeah. Yeah. So the most common way of investing, and it can go way back to maybe when you bought your first stock, and maybe you bought that first stock because you thought it was cool or maybe a parent told you to buy this. And they say what? They say, “Buy it and hold it. Hold it for as long as you can because over time it’s going to go up in value.” And so outside of that, really came this concept of asset allocation. And that’s how the majority of investors work within their 401ks, with advisors, asset allocation or in other words, buy and hold, or buying a well-diversified portfolio and holding it, is how the majority of investors have learned to invest in the stock market.  
 And what that really means, what that is, is you buy sections of the market. So let’s just say, you’re looking at your 401k and maybe it’s held at Fidelity, and you have all these different options that you can buy. You can buy into the large cap arena of the market, the midcap, the small cap, you can buy international, you can buy different little sectors and you can just go all over the place and buy little pieces of the market. And asset allocation in a way says, “Let’s buy a little bit of everything because we don’t know what’s going to do better in a given year or a given period. So let’s just buy a little piece of everything, and some will do well, some won’t do that so well, and some will be just kind of flat, but overall we’re going to do okay over time.”  
 And so, you just buy it, you hold it. And then maybe every quarter or every year you rebalance, because maybe that large cap position did really well. And you want it to divvy it back up, back into your original well diversified portfolio. That is a strategy. And like Radon said, every strategy including ours has its flaws. There is no perfect strategy out there otherwise everyone would be in it. And so, when it comes to buy and hold and asset allocation, the immediate thing that we see is that, well, when we have these situations like 2001, 2002, where the markets fell significantly over 50%, like we saw in 2008, the markets falling over 50%, like we saw in 2020, the markets fell 34% because of the coronavirus in a matter of less than two months, the buy and hold investor, really, really feels the brunt of that.  
 Because the story is, is you buy it and you hold it and you’re going to see some downs, you’re going to see some ups and you just live through the waves of the market. And so, that is a high level as to what asset allocation, buy and hold, well diversified portfolio investing means. And a lot of people are doing that just because sometimes we don’t know what else is out there. And so our whole concept is a little bit different. We take a little more of an active approach and our whole purpose is, let’s actively manage the markets, but let’s do that with good risk management as well. And so, Radon, you want to take us through how we do that and how that’s different than what I just explained.  
Radon:We were actually having a conversation with a person today actually, and this whole idea of, well, how do we do what we do? And we started talking about it, and it comes down to this idea of supply and demand. And so the question that he asked was, “What’s our gut tell us about the rest of the year?” And Murs and I both looked at him and kind of smiled. And we said, “We have no idea.” And that’s why we love how we for our clients do manage money. And it’s because we’re not managing money based on a gut feeling, based on a forecast, based on what we think is going to happen in the market, because we have no idea.  
 What we are doing though, is we’re looking at real data and we’re saying, “Hey, what is the market doing?” And I just want to take you back in your mind here to January 2020. Now, suppose in January, well, just to say, literally, December 2019, January 2020, was there any forecast out there saying, “Hey, here’s what’s going to happen this quarter. We’re going to have a pandemic and a global shutdown. And we’re going to have a massive decline in the market.” No, because nobody could have forecast that. They would’ve been the biggest theory, even if somebody had heard of this idea of COVID 19.  
 So what was beautiful about, I think the way we help our clients, is that, Hey, here comes this pandemic, here comes this situation. And we were able to react because we already had a strategy in place, not for a pandemic but for anything. Anything that’s going to spark the markets and make the markets have a controlled or significant loss. And so we were able to go into action. What did that look like? Well, what we had to do was go to cash. So we sat in cash. That’s called active management from our perspective. That means we could be invested now, and we could be sitting in cash tomorrow.  
 Now it doesn’t really happen quite that fast. It took us quite a few days in that downturn of 2020 for us to go to cash. But because we went to cash, our clients were only down 9% when the stock market was down 34. Now we had to get back in, and again, that’s active management. So I always try to help people to imagine if you could, everything laid out, stocks, bonds, cash, pretend that they’re all in a race. The only way that bonds catch up in the race is if stocks are falling, because stocks are going to outpace bonds. The only way that cash is going to catch anything is if stocks and bonds are deteriorating and then we go to cash.  
 That’s what we had to do in March of 2020. Because we did that we protected against significant loss. Now you also got to get back in. And so that’s why this person asked us. They said, “Hey, how do you guys know when to get back in?” Well, there’s no way that Murs and I can track the data and sit here and talk to you on a podcast and talk to clients and all that kind of stuff. So we have to pay other firms significant amount of money to give us data that they are tracking all day, every day. And then they give us that data, and the data then lays it out and says who’s winning the race. This is not a day by day change.  
 This is more of a month by quarter change. Okay? So it’s going to change monthly. Some is going to change quarterly, but we can always stay with what is taking the lead. So we can shift. We did one of those shifts going from 2019 into 2020. After the pandemic, we went into small cap funds and we rode those for some time. Now we’re sitting back in some large cap and midcap funds. But the reality is, we don’t know what’s going to be next. We have no idea. But what’s beautiful about this, by the way, Murs and I sat in the office in 2020, in the beginning of the year, neither one of us nor any of you have ever lived through a pandemic before, a global pandemic, and so we had no idea how this was going to play out.  
 The news was horrible. It was only getting worse. But the numbers and the data said, about 40 days after we got out that we were supposed to get back in. Now, the news was worse than we could ever have imagined. Emotionally, we were scared, but the data said, go back in, so we did. So how did the year end up? Well, we ended up making, and our growth portfolio after all fees, 19%. So we felt good about going back in, but I’m going to tell you it was hard, but that’s the difference between an emotional investor and a data driven investor. And that’s what we are. We’re data driven.  
 So Murs, could you just sum this up, I guess, and say… I’ve been doing this for 20 years. Murs and I have been doing it together for 10 years. Tell us all, what were some of the feedback that you got from people that were in the moment with us, our clients, individuals that we had taken them out and put them back in, and here we are sitting when the dust settled, maybe some of the feedback that you heard from individuals about what they experienced by this active management versus this buy and hold scenario?  
Murs Tariq:Yeah, the most common feedback was, “Hey guys, we really understand why you call yourselves Peace of Mind Wealth Management.” And they felt peace during that period of time. I mean, imagine if you had to ride… Now, we know that the market came back and it came back very strongly at the end of 2020. But imagine writing it down, writing it down that 20% or 30%, at that point you don’t know if it’s going to come back or not. And throw this on top of it, you’re a retiree living on maybe somewhat of a fixed income, or you’re considering retiring in 2020, and all of a sudden your [inaudible] or 401k plummet 20% or 30%. So for our clientele, they saw, and we were giving them updates, regular updates. “Hey guys, the market is falling. We’re watching the numbers. We’re watching the numbers.”  
 Eventually we gave them the update of, “Hey guys. We found it. It is time to go to bonds.” Next update was, “Hey guys, bonds are not working. We’re going to cash.” This all happened within a matter of a few days that we’re giving them these updates. Eventually we’re sitting in cash and the updates began to say, “Hey, we’re in cash. And the market is still falling. Your money is protected.” And then the moment came to get back into the market. At that point, pretty much everyone trust us. And they said, “Hey guys, you navigated us out of this terrible pandemic situation, this terrible market selloff, you navigated us out of this, now we trust you to get back in.”  
 And we got back in while it was nerve wracking for Radon and I, nerve-racking for clients, nerve-racking for everyone. We got back in because the data said to, and it made the most sense of the world when we look back at it today. And so, peace of mind, and really just as stress free as you can be in a pandemic, let me say it that way. Now, with what we’re dealing with right now with Omicron, we’re kind of back in the same scenario. We don’t know how this is going to play out. We don’t know if we’re going to have another 34% plummet like we did last year. We don’t know if the Fed’s going to step in and continue to do what they’ve done to prop up the economy. We have no idea. Nobody does. And so that is why our clients and ourselves feel so comfortable with this active approach because we don’t have to know what’s going to happen tomorrow. We’re going to react based off of what’s happening today.  
Radon:Yeah, I know we went through a lot. So I’m going to try to give you a couple of ways that you can get more information. One is you can go to our website, our most recent book which is called, Secure Your Retirement is right there on the books tabs. So if you go to pomwealth.net, go there to the books page, you’ll see Secure Your Retirement there. Chapter one takes you through our belief system around this, just so you can get a different perspective. But in addition, if you go to the blog page there’s a whole entire article written on this particular topic. So you can be able to read through it and let it just sink in. And we are huge about the fact of saying, buy and hold is not for everyone, but at the same time active management’s not for everyone because people have different belief systems.  
 So we have our belief system. We like our belief system. We like what it is. We feel comfortable with it. It matches our risk. And all we’re trying to do is just talk you through a different perspective. Somebody else could have a podcast all about buy and hold and why they think that is good. And then you have to say, “Hey, which one feels better for me? Do I feel better with buy and hold? Does that make me more comfortable? Or does it make me more comfortable knowing that I’m going to get out of harm’s way if this thing becomes a bigger thing?” And so that’s why we wanted to spend a little time talking to you about this again. But we hope this has been helpful. We hope this has given you some things to think about. We hope that you might give us feedback, whether it’s Omicron or Omicron, but we hope you have a great week. We’ll talk to you again here soon.