From Volatility to Stability

Jason · 00:00Welcome to episode 204 of The Numbers Game. I'm Jace. I'm here with Nick and Marty. How are we guys?

Marty · 00:06Going well, Jace. Uh, you know, the, uh, stock market, very interesting. I feel one day I'm getting wealthier, next day I'm going broke. Lots of things going on. Volatility. We love it. How do we deal with it? I don't know.

Marty · 00:19Nick, how are you?

Nick · 00:20Oh, man, I'm good. But you know, I think, um, volatility is part of life these days, isn't it? You know, you just, I think, I think the one thing COVID did was it, uh, taught us that, um, things can be bad and things can get better. So, you know, I just think back to those days and all the doom and gloom and, you know, look where we are now, sun shining.

Nick · 00:41Sun shining in Melbourne, everywhere else, I guess, if it's sun shining in Melbourne it is everywhere else, you know, D's are pushing for the finals, I, I won't, I won't say when we're recording this, but there's definitely some finals chat around, uh, sorry, not the D's, the Dons. So, you know, it's all, things always get

Nick · 01:00better, Marty.

Marty · 01:01We are a little bit early on this podcast. We, you know, Jason and I have had the discussion as to say whether we go, you beauty, the dogs have won the flag. And then we go, there's no frigging hope in hell that that's going on. So we'll just keep quiet. Keep quiet.

Jason · 01:18Yeah.

Marty · 01:18Well, how are you?

Jason · 01:19Good. We're definitely not rerecording this intro.

Jason · 01:22So whatever ends up happening happens and maybe we'll revisit our predictions from the start of the year and just show how wrong we were. Um, but no, back to the conversation we're having earlier. Uh, I always find the conversations around stock market, interesting, whether it's up or down or what's happening on an even day.

Jason · 01:39Um, so, you know, we've, we've got the great man, Nick Riley here today to take us through a bit of a conversation around, you know, just, Just how we get it right, regardless of what the market's doing. And we have seen over, over the course of history, there are all sorts of events that happen. And, um, you know, just, just before I throw to you, Nick, you know, the, the example I have of, of what

Jason · 02:00gets me through day to day is not bloody looking at it.

Jason · 02:02Because, uh, you know, whenever it gets me, you know, stressed or concerned is when one of the team in the office turned around and said, Jace, you know, Did you see what happened to Xero shares today? And I'm going, I don't want to know because I don't want to make a decision or a reaction to what's going on.

Jason · 02:15So I tend to get in and turn a blind eye and that's, that's me, but I'm hoping you can give me a little bit more, I guess, context and some ideas around, you know, I guess, correct asset allocation and take it from there.

Nick · 02:29Yeah. Well, look, it's, it's fantastic that you do that, but the reality is 99. 99 percent of people, including myself can't switch off and can't do that.

Jason · 02:39Can I admit to something?

Nick · 02:40You look every day.

Jason · 02:42No, no. The, the only reason that I don't make, I don't react is I forgot my login to my share trade and it's such a pain in the ass to reset it that by the time I've reset it, I've gotten over it. Um, so I just have it logged in. So that's, that's my, my, and not, maybe not a bad strategy for people out there that can't help

Jason · 03:00themselves.

Jason · 03:00There you go. There's a hack right there. You're sleeping. Correct.

Nick · 03:04So yeah, look, there are, the reality is that we all look and we can't help it. Um, But I think if we are educated and, um, have an understanding of why markets do what they do, it means we can look every day and, you know, if things are set up correctly, you can still sleep easy, no matter what happens.

Nick · 03:23And, um, that this, this was triggered by, um, some, some volatility we had in the market not so long ago. And, um, you know, some, some, some real volatility, you know, we had, uh, Japan's Nikkei was down 12. 5 percent in a day. Um, they actually suspended trading over there. Um, so it didn't get any worse. Uh, I think the ASX from memory was down around 6 percent over a couple of days.

Nick · 03:48And the, um, S& P 500 in the States was down, um, to 10 percent or something from its peak. And what, what happens in today's investing world, I guess, is it's, It's

Nick · 04:00very easy to sell, to sell stocks compared to what it used to be like. You know, if you wanted to sell a stock and you know, Marty was your broker, you'd ring Marty up, he'd fill a form out.

Nick · 04:09He probably faxed that form off somewhere to go to a trading house. And who knows how long it would take for the stock to actually, actually sell. Now, brokers just simply press a button and things will be sold number one. And now you've also got, um, ETFs. So exchange traded funds that hold big parcels of certain stocks.

Nick · 04:27And. You know, if those stocks go down, they will have triggers in there to sell those stocks off. And because you're aggregating so much money, when they make a decision to sell, it has a significant impact, impact on the stock price. So what you're seeing now is really quick moves, um, based on the decisions that are being made versus one that might've been dragged out.

Nick · 04:49So it can look, um, I will say badder than it is because you get immediate Uh, impact versus maybe that impact over a few

Nick · 05:00days. Um, but you know, we'll this in this particular period, you know, as I said, the, um, the S and P was down maybe 10 percent from its peak, but it also, it had also jumped around 20 percent in the last 12 months.

Nick · 05:12So, you know, it's something like, um, what happened recently was bound to happen. Um, because when things are good for a very long time and things have been good, Uh, since COVID we're recording this in 2024. Uh, the last crash we had, I guess, was, was COVID, which was 20, 2020. Was that

Jason · 05:302020? March, April, 2020.

Nick · 05:33So it's been good times for a very long time and, you know, cycles would suggest that at some stage things come off the boil.

Nick · 05:39So I thought it'd be a really good time to, um, just remind people of the importance of asset allocation and number one, what it is, and number two, um, how it should be used Be set up for you based on your individual circumstances without giving advice so that when the volatility in the market exists and it'll never, it'll never

Nick · 06:00not exist.

Nick · 06:00It'll come and go at times, but it'll always be there. Um, have you got your asset allocation, not just in the share market, but across all of your investments, whether it's property, cash, whatever it might be, that volatility in the share market, you know, doesn't impact your sleep. How's that sound, Jase?

Jason · 06:18I like it.

Jason · 06:19And that means if I can figure out how to get into my share trade, it might stop me from, uh, being trigger happy and doing something silly.

Nick · 06:25Yeah. Marty, any tips there on how Jase can log in? Are you?

Marty · 06:28I'll leave the tech stuff to Jase, but I would say, um, Again, just having a discipline around your investing as well, like having principles around it.

Marty · 06:41So when those swings do happen that you're not reactive and emotive, because it's so easy to say, Oh yeah, when, when the dip comes, I'll be able to deal with it. Soon as it happens, everyone's hitting that button. Sell, sell, sell, sell, sell. And then that causes a problem. So again, you got to know why, what your goals are, what your strategy is,

Marty · 07:00and to have that managed.

Marty · 07:01So I'm interested to hear what you have to say about the asset allocation. Cause that, that's always interesting to me is to go, you know, what, how should we look at, be looking at that? Cause otherwise we're kind of stock picking or. All the financial planning planners are doing funds. So yeah, just interested.

Nick · 07:18Yeah. And I actually really like what you said there because you're spot on because it's all going well to want to run through some, um, some things around asset allocation. And this is the plan I need to stick to. Um, but it's difficult to do that when everything's either going down or everything's going up and you want to buy more.

Nick · 07:35So you really do need to stick to your principles. And if you can't do that, if you're someone that can't stick to your principles. Then find a way that, that that can happen without your intervention. So whether that's through a financial planner, number one, or it's, it's through a particular ETF, that's going to manage that for you.

Nick · 07:51Um, and don't give yourself access to it. So, but if you, if you set a strategy, um, or a plan up and you don't

Nick · 08:00stick to it, I wouldn't say it's pointless, but it can all unravel pretty quickly because you'll do the opposite of what you should do, uh, which is what most people do do, uh, unless you're Warren Buffett.

Nick · 08:09And he does the opposite to what we all do. And he's, you know, very wealthy man. Um, anyway, so to, to open it up, um, asset allocation. So Jace, I'll, I'll pass it to you. What's the first thing you think about when I say asset allocation?

Jason · 08:27Uh, it'd be the split between, you know, where, what stocks I've got, for example, in Australia or the U S and then also probably going down further into, uh, tech versus different industries.

Jason · 08:40So just making sure I've got a bit of a diversified portfolio is what I think of when you say asset allocation.

Nick · 08:46Good answer. Yeah. I'm going to simplify it even more. And I'm going to talk about two types of assets and they are defensive and growth. Now, obviously.

Nick · 09:00Um, in those two buckets, you've got numerous assets and, um, you know, some of the ones you read it off then for sure.

Nick · 09:07But you know, what, uh, what's defensive and what's gross. So what's, what's something, um, how much money do you want in assets that are not going to grow as much, but are protected. So they're not going to have the volatility. Um, like we see in the stock market and then what's the growth assets. So how much am I prepared to put into a growth asset?

Nick · 09:27It's one that's going to go up and down a lot. Um, but over the long term, it's probably going to have a better chance of going up, um, at a bigger rate than the defensive asset would. So first thing is you need to understand what should I have in my defensive bucket and what should I have in my growth bucket, um, and that will be different for everyone.

Nick · 09:49Um, some of the things that will determine that is how much money you have Um, what stage of life you're in. So for example, um, are you

Nick · 10:00retired and no longer earning money and not going to be investing for too much longer? Well, then you're probably going to be okay with a more defensive style of asset.

Nick · 10:09You're not chasing the growth. You might have enough money, uh, to last until you move on from this life. Um, but as long as you understand that you're not chasing the growth where you're really protecting the capital base and making sure that, you know, the money that you've got is going to last you.

Nick · 10:25Someone like yourself, Jase, who's got, you know, maybe 30, 40 years left investing in markets, uh, probably 30 years of income generating left. So you're going to continue to add to your stockpile of money, so to speak. So you can probably afford to have more in the growth, in the growth bucket. You're chasing bigger returns.

Nick · 10:44The volatility is okay for you because you're still earning money. You've got a long time invested in the market. And we know that markets, you know, do go up and down, but over time. They generally go up, um, with some volatility, volatility in the middle. So it's understanding where you're at

Nick · 11:00in life, um, and that will determine whether you should have the majority of your money in defensive or growth assets.

Nick · 11:09Make sense?

Jason · 11:10Definitely. Really good. Yep.

Nick · 11:12So to put it into an example, um, a lot of our retirees, for example, they will have a majority of their money in defensive. So we're just making sure that they've got enough money that they need to live on a daily basis or a yearly basis, whatever, um, methodology we're working with.

Nick · 11:30And then I might allocate a little bit of money. So money that they don't rely on. And try and get some more growth out of that through growth assets. So growth assets are things like stock markets. So volatile, um, but should generally go up. Um, property, um, is a growth asset, not as volatile as stock markets.

Nick · 11:50Again, not giving advice here, but historically talking not as volatile. I'm talking about Australia here. Um, but that will go up and a defensive asset would be something like a term deposit

Nick · 12:00where you have a guaranteed return and you don't lose any capital. Or cash, cash at the bank, you know, it's got a, it's got a return of some type, which is variable, but you know, that money is not going to go down.

Nick · 12:14So you can rely on always having access to that money. Um, a bond is another example. So it's a, um, it's also traded on the ASX. You can buy bonds. So again, your defensive assets will be capital stable. So very small chance of going backwards, but because of that low risk, you get less chance of a return.

Nick · 12:35Growth assets, high growth, high chance of a risk or high chance of losing money. Does that make sense?

Jason · 12:41Yeah, definitely. So I guess, you know, give, given, you know, the stock market hitting turbulence every, you know, every so often and whatnot, I guess what I'm trying to say, especially the world you're in with financial planning, have you seen people get this wrong if they aren't monitoring their asset

Jason · 13:00allocation?

Jason · 13:00Like we'll say, you know, someone in their fifties. That hasn't started retirement planning and was thinking, yep, I'll be able to retire in a couple of years. And they cop some, you know, stock market hit because they're in all these growth assets. Is that something that happens? Like, or is it not that drastic?

Nick · 13:16Uh, it's usually the other way around. So, um, I'll give you an example or a couple of examples and, and yeah, this is, this is really sad, really. Um, if we go back to 2020 when COVID happened, we're obviously financial planners. So. Um, the markets dropped, um, depending on when you're looking at them, but let's say they dropped around 30 percent plus, um, at some stage.

Nick · 13:41So what happened post COVID is a massive upswing and recovery of the market. And then, you know, I think 12 months later, it was back to where it was. So we actually had people that, uh, called our office, uh, maybe eight months or 12 months past, um, 2020 or the crash,

Nick · 14:00uh, had share portfolios or super funds, um, without advice attached.

Nick · 14:06And when the market dropped 30%, actually, um, scared, which is fair enough, thought they're going to lose everything and sold and went to more defensive. So more defensive, if you're in the markets, more defensive is cash. So they sold, they got a cash. I've lost 30%. I need to stem the bleeding. I'm going to move it all to cash.

Nick · 14:26Um, they then sit on that for 12 months because they're worried, um, whilst the market's recovering. They come back to us, or they come to us in 12 months time because they think things are back to normal and they should get in the market. And they've really just factored in a 30 percent loss, whereas they just had a state invested.

Nick · 14:43All of that would have come back. So I guess really, and I'm, I'm, I'm only talking about mum and dad, Australians. Rarely do you see people have all their money in the share market. Um, and you know, they lose it all because we're, we're generally the other way around. We probably are more conservative

Nick · 15:00as a nation, really, particularly the current, um, generation coming through to retirement, which is baby boomers.

Nick · 15:06They're generally more conservative. So we probably see people too conservative. Yeah. And the other issue that we've got in society at the moment is people are living longer. So you need to have some of your, your investments allocated to growth to make sure that your superannuation or your investments or your stockpile is enough to actually, you know, fund you maybe to age 90, 95 instead of age 78, 80.

Nick · 15:29So it's usually the other way around. Um, as surprising as that might sound.

Jason · 15:35Yeah, there you go.

Nick · 15:36Yeah,

Marty · 15:37I just, uh, Nick in regards to, like, I'm just thinking defensive, like 52, certainly don't do this cause I'm doing it, but I, I, Charlie is challenging me at the moment in regards to my Berkshire holding. So he says, I've got it.

Marty · 15:52Yeah. Yeah. Too much in Berkshire B and I should be spreading that risk more. And I said to him, well, Charlie, listen to dad here, you

Marty · 16:00know, there's, there's 41 stock that Buffett owns and you know, he's got businesses as well. So I would see that as a defensive play. And a lot of people, a lot of people say like on, on more growth stocks, more speculative stuff.

Marty · 16:13I've always been of the opinion. This is my own principle. I'll never allocate more than 10 percent of that. That's my play money. But I do say, I do say people go at 90 percent on all the growth stuff that, um, and, and look, I'm probably not, not balanced, certainly not balanced in what I do, but I just have a methodology that I like, that I feel like I'm safe.

Marty · 16:35I like to be in major companies that I know are making money. And then if I have a little play, it'll be on the back end. Um, and, But has Charlie got some merit there in regards to should I be in an AFT potentially that's safer and more defensive? Uh, am I more susceptible having one stock like Berkshire?

Marty · 16:55I would suggest not

Nick · 16:58because it's, even

Nick · 17:00though it's, you're saying it's not a growth stock, it's still a stock. So it's still considered as a growth. Asset. Yeah. And it's still considered as volatile. So, you know, when we're talking growth, we're not really comparing, um, you know, ASX 200 company versus another ASX 200 company.

Nick · 17:17Uh, we're comparing being in the market versus being in a term deposit or a cash in cash or, you know, of, of, of course there are more risky stocks. You start talking small caps or micro caps. Obviously, that's a different story and that's a little bit deeper. Um, but that's also your play money and you know, I'll, I'll, I'll, I'll give you, um, another example.

Nick · 17:39Again, I look back to retirees and quite often, this is not saying anyone should be a particular risk profile, but quite often there'll be a balanced risk profile when they're getting ready for retirement. So that will mean anywhere from 50 to 60 percent of their money is in defensive assets and 50 to 60 percent of their money is in growth,

Nick · 18:00depending on, you know, how, how much they want to lean towards the other side of balanced.

Nick · 18:05Now, what it means is that Okay. Let's say you've got 50 percent of your money defensive and 50 percent of your money in growth. If the market drops by 50 percent and you've got 50 percent of your market of your money linked to that market or invested in that market, you're not in a position where you need to sell those funds or those stocks because the market's dropped by 25, 50%, whatever it is.

Nick · 18:34Hypothetically, you had a million dollars. So you've got 500, 000 protected in defensive assets. So, you know, you know, let's say you've got a couple, that's got a, you know, hundred grand a year living expenses. Hypothetically, I'm just picking numbers here. If they've got 500 K in defensive assets protected, they know they've got five years of their living expenses covered before they need to worry about realizing any of

Nick · 19:00the growth assets, the other 500, 000.

Nick · 19:03Now, again, we can only go off historical data and look at what's happened, but what I can close the guarantee you is that if we have a situation like COVID where that money they had invested in growth assets drops by 30 percent over a 12 month period, there's every chance in 24 months, it's going to be back to where it was.

Nick · 19:23And they didn't need to sell any of those assets. And they didn't need to realize any losses on those assets because the defensive assets was funding their lifestyle. Now what's generally going to happen over time. If they stay invested, that money will continue to grow and grow and grow that's invested.

Nick · 19:41In growth stocks and at some stage it's probably going to be worth more than 500. That's just the reality if they never touch it. So what, what this is going a little bit deeper on this. So the next thing that we need to talk about is just maintaining that, that balance of the 50 50. So hypothetically, Marty, they've got

Nick · 20:00500k in, um, defensive assets in cash.

Nick · 20:03The 500, 000 they had invested. We have a really good time in the stock market. All of a sudden it's worth 600, 000. So they now have got 500, 000 defensive. 600, 000, um, in growth, they're no longer 50, 50. So maintaining that risk profile means we will sell 50, 000 of the gross assets to get it back to 55, uh, 550 and we'll have 550 in defensive then.

Nick · 20:29So you're always maintaining that balance. And what you're actually doing is you're actually taking money off the table or profit off the table and readjusting that back to what your risk profile should be, which is the balanced. And that's where you go back to your initial comment around sticking to the process, um, sticking to the plan, sticking to the objectives.

Nick · 20:50Cause what most people will say is, Oh, those growth assets are flying. I'm not going to touch them. They shoot up to 700. And then we have another, another COVID and all of a sudden

Nick · 21:00they go back to 450 and you've missed your opportunity to take some money off the table. So it's constantly maintaining that, that risk profile for you and whatever that is.

Nick · 21:10And that will very much be determined on where you're at in life, how much longer you've got, um, on this planet, um, whether you've got the ability to continue to in, to, uh, earn income, how long those, those, that money's going to be invested for, if it's only a two year period, it's probably going to be more defensive because there's so much volatility that can happen.

Nick · 21:33That you don't want to be needing to sell something within a two year period. If you've got a growth asset, you really want to be invested for a long time. So if there is some volatility, it doesn't matter. You can leave it in there and wait for it to come back. Back to parody or back to where it was.

Marty · 21:46I love, I love that balanced approach and just taking money off the table when it's there to rebalance is, um, I wouldn't think a lot of the audience would be thinking about, uh, in general terms, but that's, that's, uh,

Marty · 22:00Fantastic.

Marty · 22:00And I think just with what the growth stocks have done recently, like, um, like I had Microsoft and Google, and I did take a bit because I thought, I thought it was sort of too high a percentage and now bit of dumb luck too, right? I thought it was the right thing to do. And, you know, it's, it's sort of.

Marty · 22:18Prove it to be a good thing because the rest of it's just, uh, come back at a rapid rate with the volatility. But if I hadn't have done that, it, um, yeah, more would have been at risk. But I like the fact that if I'm having those conundrums, you know, looking at it every day, imagine what everyday people that aren't looking at it every day.

Marty · 22:36I think this is where that, that advice you just gave is real sage advice for people, you know, throughout their investment journey, but particularly coming into retirement too. And, and

Nick · 22:46I'll tell you where it gets even harder. And this is what really separates the, um, the normal person from someone like Warren Buffett.

Nick · 22:54So as much as we're talking about taking profits to maintain your, your risk

Nick · 23:00profile, if it is balanced, we're also talking about diving in a bit deeper when the market comes back. Because let's go the other way. Let's, let's use the million dollar example. And let's say you've got the 500 and the 500.

Nick · 23:14Defensive 500, growth 500. Let's say the market comes back. And the market comes back to, um, and your growth assets come back to 400. So now you've got 900, 000 in total. You've effectively lost a hundred K, right? But you've now got 500 defensive, 400 growth. So you've actually got too much defensive. So someone who's strict and sticking to the process will actually take 50 grand of that defensive.

Nick · 23:46Bring it back down to 450 and buy 50, 000 worth of those growth assets that have just gone down by a hundred K to get back to the balanced. So now you've got 450, 450, and then what should happen and

Nick · 24:00historically happens is you'll get bigger uplift on that extra 50. And that is what a, um, if you went to, uh, an advisor, That happens automatically.

Nick · 24:10We're, we're doing that every three months rebalancing every three months. We're taking money that's gone up. When things are going down, we put, we're, we're reallocating. And that's what gets you the exponential compounding returns over time. Um, you have to be confident about what you're invested in. So, you know, if you're, if we're talking growth assets within a super fund, you're generally in, you know, the ASX 500, the S& P 500.

Nick · 24:36So these are not specky stocks. These are. These are quality, um, earning stocks that you know that if they have a dip, they're generally going to come back as long as they're doing what the market's doing within reason and not going far outside that. I'm not saying, you know, if you have a micro cap stock that drops by 50%, you go buy more of it.

Nick · 24:53Not at all. I'm talking about, you know, the ASX 200. So that is the

Nick · 25:00hardest thing to do. But that is what the likes of, you know, the expert investors do. And that's why they're continuous like that. Continuously make money because they're really confident about their, what they're invested in. They know what it's worth, so when it drops, they buy more.

Nick · 25:13It's pretty simple. And you know, you're a big Warren Buffett fan, and that's, that's what he basically does.

Marty · 25:17Oh, it's, it, and it would be so anti intuitive to put those defensive funds into those stocks at that time coming off a loss. So this is the important thing about the principles and, you know, having a plan of attack that's consistent, uh, no matter what the market's doing.

Marty · 25:33But if that's, that's just such great advice out there to the market and, Boy, oh boy, are professionals helpful in these situations. Well,

Jason · 25:41yeah, I was, I was about to say that. And I'm so glad there's not something, you know, I'm some people manage it themselves, but I'm so glad for myself. I sit back going, that's not something I want to be in control of and have to manage, I think, you know, meeting with a professional, um, obviously, you know, no disclaimer here, I've said it many times on the show innovate team and my financial planner,

Jason · 26:00but having that initial meeting revisiting it every year, you know, so we're looking at my age, we're looking at my financial goals, looking at my risk tolerance.

Jason · 26:07And then my investment time horizon and all those decisions that are made by a team who know what's going on in my life and Casey's life and where we're trying to get to, I don't have to think about the three monthly rebalancing or how this is going. It's just handled by a team of professionals that, you know, again, give a shit about where I'm trying to get to.

Jason · 26:25So

Nick · 26:26yeah. And, and, and the other key thing is you, you don't, you don't make knee jerk decisions that are incorrect when markets are. considerably volatile because your, your profile has been set up in line with that volatility. Now, if you're someone who's closer to retirement or has got a more balanced risk profile, you're not going to feel the volatility as much as someone who's 100 percent invested in those stocks or in, in those growth assets.

Nick · 26:58So Jay, someone your

Nick · 27:00age, it really doesn't matter. It doesn't matter if the market drops by 50 percent tomorrow, because as long as you're in. Good investments, you know, they kind of come back. Someone else who's a bit older, it does matter. So while the market drops by 50%, their portfolio might be 70%. Um, protected in defensive 15 percent drop because only 30 percent of their exposure was that, uh, was to growth assets.

Nick · 27:24So it's going to be different for every people, uh, every person. And, and we're not just talking about your asset allocation. If you're invested in stocks, we're talking about you as an individual. So do you have property? Do you have stocks? What else have you got? Do you have some crypto? Okay. So what does your asset allocation look like as an individual?

Nick · 27:45And you know, for someone like yourself, Jason, I'm picking on you because I think a lot of listeners will be your age, but it's like, okay, well, I've got all these investments. What have I got protected? So yes, my risk profile is probably growth, but I want 30

Nick · 28:00percent or 20 percent of protected money that if something goes wrong with my business, um, or myself and my partner can't.

Nick · 28:07Uh, generate an income for 12 months. What have I got to fall back? What have I got to fall back on that's defensive that'll get me through the 12 months, whether it's 12 months of living expenses or whatnot. So I don't have to sell the investments cause the investments are there to grow. So your risk profile is not just about a particular fund.

Nick · 28:26It's about your total assets and liabilities and you know, what's your What's your rainy day money so you don't need to realize or sell investments at the, or growth investments at the wrong time.

Marty · 28:38Yeah. Yeah. Cause the individual goes, you know, it goes through all these emotions, market crash, FOMO, market crash, FOMO.

Marty · 28:46And they're always buying counter cyclical, uh, when they, when they should be buying anyway. So it's to have an actual plan mapped out based on your goals. Um, you've just got a template that's going to work over time and it takes

Marty · 29:00all the stress out of it. Uh, otherwise you're just a mess. So a

Nick · 29:05big part of us talking with our clients, when we're explaining a risk profile and determining their risk profile, we're showing historic market performance, so they get a real understanding of why they are that particular risk profile and what that volatility means to them.

Nick · 29:21So it also means that when things like this happen, they're not so worried. They're not so worried when the market's volatile because they get, they get it. They understand it. They've been educated on it. They know that, you know, whether they're exposed to it at a high level or a low level. So the education piece is huge.

Nick · 29:38Um, and the one last thing I want to say is that if, if you do experience some, um, uh, some high volatility like the recent times and like in, um, during COVID. Do not make a decision on what to do if you are not 100 percent confident that it's the right one. Reach out to a

Nick · 30:00planner, reach out to a friend that knows a planner.

Nick · 30:02If you, if you don't know one yourself, I always say that the best or the best people to call her us, of course, but also speak to someone and ask them, do they have a planner? Um, cause it w it was truly sad when we had people come to us in 2021, who'd sat outside of markets for 12 percent and had missed all of the uplift, um, from, from stocks that they'd sold and.

Nick · 30:27If they just had a, had advice or they haven't had a planner on, on board, their risk profile would have been right. And they would never have felt the need to sell because they would have known that their, their fund was set up to deal with this volatility. So that's the one thing I would say, don't, don't make a decision.

Nick · 30:43If you're not confident, you're making the right one, get some help.

Jason · 30:46Um, off the back of all the, uh, you know, potential, the volatile stuff that we've experienced over the coming weeks. Yeah, there's plenty of, uh, murmuring out there in the, in, you know, yeah, the reserve bank and whatnot. Is there any bright side

Jason · 31:00to, to this market correction?

Nick · 31:01Oh, look, everything happens for a reason, right? And you know, I think this, this one that we're, we're referring to, it had to happen. Things don't go up in a straight line. Um, it's been very good for a long time, so it, it needed a pullback. And the thing with stock markets is investors are always looking for a reason to sell.

Nick · 31:22So as soon as they see a signal, particularly when you've had such a long or longevity of performance, there's a lot of profits to protect. So the minute that there's a signal that the market could be going backwards, they sell because they've got profits to protect. So, um, it's all just, it's all just cyclical.

Nick · 31:41It goes up and it goes down. Um, but yeah, it's the, um, it generally needs to happen. So, you know, I think what we're experiencing now needed to happen. Yeah. Um, we're in an environment at the moment where there's high interest rates. Um, so hopefully this will say some, some movement that we want to see on interest rates

Nick · 32:00coming down.

Nick · 32:00Um, but you know, I think we'll look back in 12 months and we won't even think about this, to be honest.

Jason · 32:07Yeah, for sure.

Nick · 32:09Marty Vids, what do you reckon? Crystal ball. So you're rubbing it.

Marty · 32:13Well,

Marty · 32:16what I know, what I know is that, you know, in the end, you know, if we look back to those COVID times and even 2008 with the GFC, if you look back on the charts, you'd go, geez, I wish I had a bought that. Every time and, and at the time, it's very different when you're emotive and you see, you know, your stocks going down, uh, people react.

Marty · 32:39And I really like what you said about seek advice at those times, because there's only thing, there's only one thing more volatile than the market and that's your emotions. And, um, if you can, if you can control those and know that you've got a plan forward that you trust and you've got science behind that plan.

Marty · 32:58Um, and they say,

Marty · 33:00you know, History don't take history on board, you know, but I'll tell you what, it's a good indicator. So it's, um, yeah, I know we'll be looking back in, in three years time from now. I go, gee, you should have bought, look how, look how cheap it was. And yeah, and that's, that's always the case.

Marty · 33:15So yeah, ride the storm. Ride the storm.

Jason · 33:18A hundred percent. Well, this is a reminder to you out there that if you're not sure of what your asset allocation is, or even wasn't sure what it was before you listened to watch this episode, uh, might be time to get in touch with the team at innovate to have your, um, session to discuss your wealth plan for your future.

Jason · 33:33So have a look at innovate. com. au that's I N O V A Y T. Um, and have a booking with the team and have a bit of a chat. You know, you don't know what you don't know. So get in and find it out. Um, you know, looking forward to whatever your long term goals are. Term or short term strategies are, um, don't be like me and delete your, uh, passwords that you can't get a dear.

Jason · 33:50Share trade account. Just partner with the right advisor to, uh, make sure somebody's got your back in those decisions. Um, Nick really loved the conversation around asset allocation and, um,

Jason · 34:00the stock market always, uh, really good things that we can implement and learn from, from your episodes that you bring to us.

Jason · 34:06Uh, until next time though,

Marty · 34:07you work hard for your money. Make sure it works for you. Game over.

Jason · 34:12This podcast is for educational and informational purposes only. The conversations are of a general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional.

Jason · 34:25Individuals on the podcast may hold positions in the companies discussed. ---