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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire On Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire On Time, which you can grab today on Amazon, or you can get a free copy by downloading it by going to www.retireontime.com. My name is Mike Decker. I'm the author of the book, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can talk about it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want financial advice, you can contact our team by going to www.yourwealthanalysis.com and request Your Wealth Analysis. With me in the studio today is my cohost colleague, mister David Franson. David, thanks for being here.
David:Yep. Thank you. Glad to be here.
Mike:David's gonna read your questions, and I will do my best to answer them. You can always submit your questions anytime during the week by texting them to (913) 363-1234. Again, that's (913) 363-1234, or you can email them to heyMike@howtoretireontime.com. Let's begin.
David:Hey, Mike. Can you share any indicators that would give us a heads up that the market is ready to start growing again?
Mike:It's a clever question because I think people have learned to not ask me, what do you think is gonna happen in the market this year?
David:Because if they do, what are you gonna say?
Mike:No one knows. Yeah. No one knows the future. So when someone first starts to DIY their investments, as in they're first starting to self manage, and typically the story is they've bought a few stocks, they've had some wins, they've had some losses, and they're trying to be more proactive about their trades. And a good Google search or some chat GPT or Grok would suggest, hey, there's moving averages, there's these different indicators, and then they start to look into technical analytics.
Mike:The problem is people take these, an amateur, would take them more as gospel and less as an interesting note to consider.
David:Okay.
Mike:So let me give you an example. We did some fun research internally here, where we looked at the fifty day moving average of the S and P 500, and the two hundred day moving average of the S and P five hundred. What in the world is a moving average?
David:Yeah. Please tell me.
Mike:So let's take the ETF SPY, which is an ETF electronically traded fund of of the S and P five hundred. Every day there's a price, and we looked at the closed day price, and you would take that price, that number, and we look at the last fifty days, so it goes up and it goes down. Alright. And we find the average amount, and then we compare that to today's price. So is today's price greater than or less than the average price of the last fifty days?
David:Okay.
Mike:Are you with me?
David:Makes sense. The average closing price. Right?
Mike:Yep. And you could be more nuanced about it with like intraday trading and the fluctuations, but to make things simple, let's look at the price at the end of the day. So in this example, if it's above a moving average, it would be considered an uptrend. But what kind of uptrend? The fifty day moving average is easier to break versus a two hundred day moving average.
Mike:If you have a positive two hundred day moving average, you're in an uptrend. Things are looking pretty good. So what we did was we just looked at this, and it was just kind of for fun. We looked at the correlation between if the S and P goes positive, so it was previously negative, so negative two hundred day moving average, negative fifty day moving average, and it breaks the fifty day moving average, so now it's positive, how likely is it to continue that trend and go positive with a two hundred day moving average? In other words, the expression a canary in coal mine, we've talked about it, but do you know what that where that comes from?
David:So they would put coal miners, they would put a canary, like a bird down in the shaft, and then if it started singing, did that indicate that there was not enough air out of something. Right?
Mike:Yeah. Or if it died.
David:Oh, yeah. Or or or if the canary dies, that's what it is.
Mike:Yeah.
David:Then they better get out of there. Right?
Mike:Either way, an indicator. So what people will try to do is use technical analysts or these indicators as the canary in the coal mine. Should they buy or should they not buy? And so many people will say, oh, well, a fifty day moving average is the golden cross. It's this, oh, it's starting to go into an uptrend.
Mike:We should buy in right now. People get excited about that. Well, historically speaking, based on our research going back to February, every time that the S and P breaks that fifty day moving average, you have a roughly 60% chance that you're actually gonna make it to a two hundred day moving average Okay. And and continue the uptrend. 40%, it could still lose money.
David:Okay.
Mike:So the reason why I'm saying this is it's really fun to get on TikTok and Instagram and Facebook and LinkedIn, or whatever social media, YouTube, whatever social media platform, and say, here's this indicator that I just learned, but I won't admit that to you, and I'm going to explain how this indicator is gonna show you when to buy and when to sell. Because any well educated, well experienced individual knows that indicators aren't always hard fast rules. It's just you take note of it. Yeah. It's like, okay, we've crossed the fifty day moving average, which we have.
Mike:Great. Let's look at the VIX. Let's look at the I mean, this is macroeconomics. Let's look at other indicators, and see if we can connect a few dots altogether to say, do we believe there's a high probability of success with multiple indicators that would suggest, yeah, it makes sense to invest more in the market or to stay out. Does that make sense?
David:It does. And you used another word there, VIX. Is that volatility index?
Mike:Yeah. So the VIX index basically just measures the volume of trading, how crazy the markets are Uh-huh. For better or for worse. So
David:Okay. Yes. Yes.
Mike:And recently, we've had a VIX of over 30 points. Was it 30? Whatever. 30. The VIX of 30.
David:Yeah. Which means?
Mike:So if it's over 30, historically speaking, the daily moves are drastic. So when that happens, it's a roller coaster. It feels rough. It's like, you know, when you first go on that really rough roller coaster, your body takes a toll Yeah. Because you weren't really prepared for it.
David:Yes.
Mike:Yeah. It's kinda like that.
David:Okay.
Mike:And recently, we've actually gone through that. The past times that the VIX has been consistently that high, I think were twenty twenty, two thousand eight, maybe twenty fifteen, and maybe 2,000. Rough times. So there is a correlation there that you need to understand, but the VIX if the VIX is low and we're crossing a moving average, then maybe things are common, things are slowly healing. If the VIX is high because it's very volatile and we cross the moving average, well, it could just go away the next day.
Mike:So you have to understand multiple layers of indicators to understand what you should do with this.
David:Okay.
Mike:In psychology, they call this the Dunning Kruger effect. Yeah. It's why the I don't know if it's politically correct or not, but whatever. People who are getting into finance, who read a couple of things and think they're smart, it's called dumb money. That's what the people on Wall Street call people that think they can outsmart Wall Street, that think they can just pick one or two indicators and beat Wall Street Yeah.
Mike:That think they can manipulate GameStop.
David:There was a whole movie about this recently. Right?
Mike:Yeah. It's called dumb money.
David:Yeah. That's right. Yeah. Thought that sounded familiar.
Mike:And yeah, most people that were invested in GameSpot, they'd lost money. Like, did not do well. So you've gotta understand when you're going into technical analytics, when you're going into indicators, when you're getting into this, you have just walked through the closet into Narnia.
David:Okay. Sure.
Mike:And in psychology, they call this the Dunning Kruger effect. It's why the nickname is why stupid people think they're smart. I don't like that. It's why unexperienced or the uninitiated think that they know what they're doing.
David:Right. Right.
Mike:And the reason is you don't know the right questions to
David:ask. Mhmm.
Mike:And the reason why I'm giving you all of this backstory is the question was, well, hey, what's the indicator? What's the answer of how do we know when to buy in? It's too complicated of a question, and there's too many moving parts to it to really give you a clear answer. So the reality is, what's the time or the duration of your money? As in, if you were to buy into the market, if you were to buy some stocks, how long do you have until you need to touch it?
Mike:If you're 20 years old, okay. You've got what? Yeah. Forty years? Yeah.
Mike:I mean,
David:you can't touch it without penalties and taxes, so you really can't.
Mike:So just buy it. Stop trying to time the market, and just go. I mean, I'm not gonna assume that I can become a doctor in a week or two and do surgery on myself. Right. I'm not gonna assume that I could become an attorney and do a reasonable job representing someone in court.
Mike:Mhmm. I'm not gonna assume that I would be a good educator, because I would just become a teacher and say, alright, here you go. Just learn this. Every profession has a bunch of nuance behind the scenes that we may not realize. Finance is no different.
Mike:And so the reason why I say that is if you're in the market, there's risk. We are compensated by the risk we're willing to take, but the longer you can hold a position, you could argue that there's maybe less risk because you don't need to touch the money until years later. So as long as you're buying good quality stocks or reasonable indexes, the Nasdaq, S and P, Dow, these are the ones that you hear over and over on the radio. Right. There's a reason.
Mike:They're just boring, time tested index benchmarks. So the point being is, I appreciate the question. Yeah. Yeah. Technical indicators are fascinating.
Mike:Keep learning about them, but use them as points of, that's interesting. Let me keep digging to figure out if I should buy in, or if I should sell. Yes. And when I say sell, I'm not saying timing the market going to cash, but maybe you've got one stock that maybe isn't doing so well, maybe move to a different stock or whatever it might be. Sure.
Mike:Yeah. Don't get suckered into the oversimplified technical indicator that says, oh, well, it's this simple. It's not. And the second you think it is, just hold yourself accountable and say, what don't I know that maybe could hurt me in how I'm handling this situation?
David:And so did we answer are there any indicators that have we reached that golden cross in in today as as of recording?
Mike:We have. We have the golden cross. The two hundred day moving average is still negative, but we have a lot of volatility, the high VIX. So it could switch at any day. We just don't know.
Mike:So I would say study it more as a hobby and fascination of pursuit, not so much a hard fast rule or gospel. But, yeah, moving averages are great. Text me if you want me to dive into various indicators you could research, and maybe have a conversation about that. Yeah. For everyone listening right now thinking about the market, have you tied in the market?
Mike:Should you be in the market? Should you not be in the market? The reality is you probably don't have the right plan, and you don't have the right strategies, because no one can time the market. Yeah. You can use indicators.
Mike:You can use technical analytics. You can do all sorts of things to better prepare yourself, but it all comes down to the plan. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time.
Mike:Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.