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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 How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much talk about it all. Now that said, please remember this is just to show.
Mike:Everything you hear should be considered informational, as in not financial advice. If you want personalized financial advice, then request your wealth analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my colleague, mister David Fransen. David, thanks for being here today.
David:Pleasure to be here.
Mike:David's gonna be reading your questions, and I'm gonna do my best to answer them. You can always send your questions in by either texting them to (913) 363-1234. That's (913) 363-1234, or you can email them to, hey, Mike, at how to retire on time dot com. Let's begin.
David:Hey, Mike. I have some stocks that are down. Should I wait for them to recover, or should I just sell them and move on?
Mike:We need to follow systems and not sentiment. And too often, we will say, I bought the stock, and I don't wanna sell it at a loss because that hurts my ego. Yeah. I don't wanna feel like I made a bad decision. I can promise you no one in the history of mankind has ever invested in the market and has a % winning record on buying stocks.
Mike:Mhmm. Every person's stock at some point has dropped at some point. Yeah. Now it maybe not didn't drop. You know, I guess, in theory, you could buy a stock thirty years ago, and it's probably up overall.
David:Yeah.
Mike:But stocks go up and down. And so the question is, what is your system? Mhmm. Is your system an algorithm? That's how we trade.
David:Okay. Yeah. Yeah.
Mike:It's mathematical. We're trying to take emotions out of it. What is the price, the momentum, and the probability of x y z stock from when we bought it to when we plan to sell it? For other people, it might be fundamental analysis. That's a system.
Mike:Is the stock undervalued, and is it expected to go up or not?
David:Okay.
Mike:K? You could just buy good companies and hold them for a long term period of time.
David:Does that be like a blue chip? Is that what we mean by
Mike:Yeah. Blue chip are are more like dividends Oh. Trying true companies. I mean, you could argue, yeah, just good old stuff, but like like, Coca Cola. Yeah.
Mike:Blue chips. You just buy and hold it forever. People understand Coca Cola. Yeah. It's a stable company.
David:Yeah. Yeah. It's not going anywhere.
Mike:No. May it always be around. Yes. Yes. Please.
Mike:I I'm on team Coca Cola and not Pepsi, except for Doctor Pepper. Pepsi did Doctor Pepper right. But the point being is, what is your system? If you're holding on to it because you don't wanna feel like you made a bad choice, that's probably a sign that you should just sell and move on. Mhmm.
Mike:It's like when you're in a relationship that you know needs to end, but you're trying to find a good time to tell them. The best time is just now. Like, just get it over with.
David:Right.
Mike:So the question I like to ask is, if you had let's say the position's a thousand dollars. Okay. You got a thousand dollars in this one stock for easy math. So, David, if you had a thousand dollars in cash, would you buy the stock? If the answer is yes, you keep the position.
Mike:If the answer is no, I'd rather buy another stock than you sell it and move over to the other stock.
David:Okay.
Mike:That's it. Get rid of emotions. Get rid of attachments. The you've gotta treat it like a system. I follow systems and not sentiment.
Mike:I cannot emphasize that more. Now there are a lot of systems.
David:Yeah. What what are some other systems besides, like, the algorithm based one, the, fundamental analysis?
Mike:The simplest system is buy and hold.
David:Buy oh, yeah. Buy and hold forever. Love
Mike:buy and hold. Yeah. And I poke fun at the people that are oversimplified in buying, like, just the S and P 500 and then, like, some bond funds, and that's it. If you're 20, 30 years old and that's what you wanna do, I have no problem with that. Mhmm.
Mike:Because over a thirty to forty year period of time, it's probably a reasonable Yeah. Strategy. I'd say probably, I think that our strategies are better. I'm biased.
David:Yeah. Yeah. Yeah.
Mike:Right? But if someone were to do that, I'm not gonna scoff at them.
David:Sure.
Mike:It's a wonderful strategy. It's a buy and hold strategy. K? You're buying the S and P. You're paying very, very little fees.
Mike:You could buy the Nasdaq, you know, gets a little bit more broad. You know, the Nasdaq two thousand, a different index, you know, diversify a little bit. K. But simple isn't always bad. It's just things get more complicated when you retire.
Mike:That's the point I try to make over and over again. Like a 20 year old buying s SPY. Wonderful. Celebrate that. Yeah.
Mike:A 60 year old that has everything in SPY?
David:Oh. Okay.
Mike:That's then I start to get nervous Yeah. Because they're very different. You wanna hear another funny story?
David:I mean, I'm all about it.
Mike:It's like people treat me like a therapist when they find out I'm a financial adviser. It's the funniest thing, and they always want confirmation bias.
David:Okay.
Mike:So and confirmation bias. You know, they want the confirmation that their bias is true. Uh-huh. So I was opening up a checking account or doing something at a bank. I forget what it was.
Mike:And this banker found out I was working in finance because it was, you know, opening something and had to, you know, show work and all that. And he starts to try and be chummy with me. And he goes, yeah. You're in finance. Like, how do you really invest?
Mike:I said, I invest in my models. I said, no. Like, but seriously, how do you invest? Mhmm. And I said, no.
Mike:I believe in my models. And he wasn't having it. He's like, yeah. Okay. Whatever.
Mike:You know when, like, they try to, like, lean over and, you know, wink, wink, nudge, nudge, and have a a friendly, fun conversation? All you need to do is buy these two ETFs, and that's it. Oh. And one was the S and P five hundred, and one was, like, an international stock holding. And he's like, I know I'm a I'm a banker.
Mike:I know I'm supposed to, like, sell our portfolios and stuff. That's all I have. It's all you need. And I'm just like, why are you telling me this? First off, why are you admitting this to me?
Mike:Uh-huh. Secondly, like, you're a licensed financial professional, and you've just told me that your job is to sell people your portfolios that you don't even follow.
David:Oh, boy.
Mike:Holy cow. Yeah. And that's really common. Frontline did a whole thing on this. The dirty secret about financial advisers is they don't do it.
Mike:Okay. Well, there are a lot of problems in here. Yeah. But the point being is have a strategy. Yeah.
Mike:Buy and hold is a wonderful strategy for a simple growth. If that's your goal, growth, simple, you can buy and hold. Yeah. If you don't wanna buy indexes, and I think there is an inherent risk with indexes because the way Michael Burry puts it is indexes. It's kinda like more and more people are buying in or they're they're getting to a theater.
Mike:The theater is getting more and more crowded Uh-huh. But the doors stay the same size. Okay. So if the S and P starts tipping and everyone starts selling their S and P ETF, when you sell the ETF, all of those stocks are being sold.
David:Right.
Mike:So it accelerates all of those stocks going down at once. Oh. It's not like one stock has been accelerated down and we can go elsewhere. It's like all of it accelerates.
David:Oh, I see.
Mike:So if there's panic in the market and everyone's in ETFs Yeah. Then the whole market becomes more volatile and not as well as individual stocks. And there is a fair argument that ETFs have become a bubble. More money is going to ETFs on an accelerated rate than just buying stocks.
David:Mhmm.
Mike:There's more indexes than there are stocks to buy. That's problematic. That's kinda weird. Of it is because of index or ETFs and how they're structuring things. The other thing to consider is if you wanna buy stocks, buy and hold stocks
David:Yeah.
Mike:You can buy a bunch of companies that you understand. But, again, you're kind of just saying, I'm I don't wanna do research. This is buy and hold or buying stocks that you understand. You know, you buy Apple, you buy Tesla, you buy Nvidia, you buy companies that are popular, you understand the concept. That's fine.
Mike:But you're you're saying, I don't wanna do the research any more than what I understand, and I'm okay with that. Yeah. But anyone that says they can beat Wall Street, I recognize there are bad or not as successful fund managers out there. I get that. But I also see that people will say one thing and they do something else, and they don't compare apples to apples what's going on.
Mike:Mhmm. So the one I do wanna talk about, the most sophisticated one, the the one I really see on often on Wall Street, the thing that we do here Okay. Yeah. Managed assets, the the models that I believe in, and you can read about this if you if you read the book, what works on Wall Street, is absolute return models.
David:Okay.
Mike:So everything I've said previously talks about models or or systems. We just buy and hold something. Yeah. Market cycle. They go up.
Mike:They go down. They can go flat. And so in my mind, if my job is to make people money, my question is where is the best place that I can find to make money regardless of market conditions? So if I'm gonna place thousand dollars Yep. In something, where is that?
Mike:And I don't have enough time to research the thousands of stocks and all this stuff. And so what I do is I put them through an algorithmic system and say, if I were to put a thousand dollars in this position for three months, which stock has the highest probability of success based on our measurements Okay. Of growth for that three month period of time. Knowing that maybe in month one and month two, it might get a little squirrelly. There might be some volatility, but if we hold it, that this is the trend that we expect.
Mike:I'm trying to cut through the noise to get rid of the inefficiency, the positions that aren't going anywhere, and really look for the ones where there's growth potential and then move to where there's next growth potential. This is not timing the market. It's a common misconception. Timing the market is where you're in the market, and then you go to cash, and then you go in the market, and then you go to cash. Someone says don't time the market.
Mike:That's really what the definition is.
David:Okay.
Mike:What we're looking for is we're looking to shift based on opportunity.
David:Okay.
Mike:That is a system. There have been plenty of times where I'm going, well, this the system, the algorithm says buy the stock. I don't know. I'll even be nervous sometimes about it. Sure.
Mike:But we follow the system, and I would say most times, it's got a good winning record. We don't not every trade of any any professional is gonna anyone really is gonna get a % batting average here.
David:Right.
Mike:But we tend to make more good trades than bad trades. Overall, the system is working. Yes. So we follow the system. It's just people don't hear absolute return models.
Mike:Right. Because most of the industry is based around buy and hold. Entire institutions build their entire business around selling people the idea of buy and hold.
David:Mhmm.
Mike:When I think a more active approach is actually better for investors. If you hire a finance professional, it's because you believe that they can get you a better return net of fees than whatever you would have done on your own. Right. That's the only reason why you hire a financial professional.
David:Because you don't have the time in your life to be dedicating the I don't know how many hours to search and
Mike:all this stuff. You just you want someone else to do it, and they do a better job within you anyway. 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.
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