How To Stay Strong When The Market Is TANKING | Ep. 11
Audio Brief
Show transcript
This episode explores crucial investing mindsets, emphasizing the necessity of emotional detachment, investor self-reliance, and rigorous due diligence amidst market dynamics.
There are three key takeaways from this discussion.
First, cultivate a long-term investing mindset. View market volatility and downturns as opportunities to acquire quality assets at a discount, rather than a cause for panic. Emotional detachment is crucial for making strategic, objective decisions focused on achieving long-term goals.
Second, embrace investor self-reliance and critical due diligence. Individuals must be their own best wealth managers, conducting independent research and exercising healthy skepticism towards financial products, especially those with aggressive sales pitches. This includes scrutinizing polished corporate earnings reports and understanding the fine print, as Wall Street's primary function is often sales, not just asset management.
Third, prioritize smart capital allocation and alignment of interests. Be willing to sell a good investment if a demonstrably better opportunity arises that can more effectively advance your long-term goals. Additionally, seek out fund managers who possess significant "skin in the game" by investing their own capital in their products, ensuring their financial interests are aligned with yours for strong performance.
Ultimately, successful investing demands a disciplined, informed, and self-reliant approach, underpinned by a clear strategy and the willingness to learn from diverse perspectives, to navigate market complexities and optimize long-term wealth creation.
Episode Overview
- The hosts explore the connection between personal discipline, demonstrated by a commitment to run a half-marathon in 30 days, and the emotional discipline required for successful long-term investing.
- The conversation delves into practical investment strategies for navigating market downturns, emphasizing dollar-cost averaging over market timing and maintaining an objective, unemotional approach to portfolio management.
- The episode stresses the importance of investor self-reliance, urging listeners to conduct their own thorough research, be wary of the sales-driven nature of the financial industry, and learn from a wide variety of investors.
- The discussion concludes with a philosophical reflection on differing life mindsets—one driven by an intense fear of "not living" and another focused on balance—and how these personal drives shape financial and life decisions.
Key Concepts
- Long-Term Investing Mindset: The core philosophy of ignoring short-term market volatility and focusing on long-term goals, viewing market dips as buying opportunities rather than a cause for panic.
- Dollar-Cost Averaging vs. Market Timing: A central theme is the futility of trying to predict market peaks and valleys. The hosts advocate for consistent, scheduled investing (dollar-cost averaging) as a superior strategy.
- Objective and Unemotional Investing: The importance of avoiding emotional attachment to stocks, enabling an investor to make rational decisions, such as selling an asset for a better opportunity, similar to Warren Buffett's approach.
- Learning from Diverse Investors: The idea that valuable insights can be gained from all types of investors (e.g., real estate, dividend, growth), and that dismissing someone based on their niche is a significant mistake.
- Total Return vs. High Yield: A caution against being lured by high dividend yields without considering the total return, as a high yield can mask a depreciating principal investment (NAV erosion).
- Investor Self-Reliance and Due Diligence: The financial industry is often motivated by sales, not asset management. Therefore, it is the individual investor's responsibility to perform their own research and be their own "best wealth manager."
- Corporate Pressure and Transparency: During earnings season, companies are under immense pressure to present a "squeaky clean" balance sheet to attract capital, sometimes using complex language to obscure the full picture from retail investors.
- Personal Drive and Life Philosophy: The contrast between a "go-go-go" mentality, fueled by a fear of not living life to the fullest, and a more balanced, sustainable approach to life and personal challenges.
Quotes
- At 1:07 - "The kicker is, it's 30 days away, so I got 30 days to... really, you know, get my groove and gear here." - Ari emphasizes the difficulty of his challenge by revealing the short preparation time for his half-marathon.
- At 4:00 - "...down about, like, almost 15 grand... and it didn't even trigger me at all. I just said, 'Uh, about ready to dump another 8 grand in.'" - Ari explains his unemotional reaction to his portfolio's drop in value, seeing the downturn as a buying opportunity.
- At 4:24 - "Is anybody thinking long-term anymore?" - Ari expresses his core investment philosophy, questioning the short-term fear driving the market.
- At 7:43 - "You can't time the market. You'll never know when the actual peak or valley is gonna be there, so dollar-cost average." - Ari gives direct advice, stressing the importance of consistent investing over trying to predict market movements.
- At 23:57 - "Great, great, great mistake, I think many of us make is saying, 'Oh, he's that type of investor, can't learn from them.' Wow, what a mistake." - Emphasizing the folly of dismissing investors with different strategies.
- At 24:32 - "You cannot get emotionally attached to your stocks... Investing means being objective on your investments, and when it is time to sell, you sell for a better opportunity." - Sharing a key lesson on the importance of objectivity in investing.
- At 25:31 - "The question comes back to, what's my goal? What am I doing? Could this money be better spent elsewhere or reallocated where I'm going to make a stronger ROI?" - The host outlines the critical questions an investor should ask when re-evaluating their portfolio.
- At 34:25 - "You got to be careful because again, it just wraps back to sales... their job is sales. It's not asset management. Their job is sales." - The host gives a cautionary take on the primary motivation of many financial industry professionals.
- At 34:37 - "You yourself are always going to be your best wealth manager. Don't trust other people with your money. Don't be sold on things. It's up to you." - Advising retail investors to take full ownership of their financial decisions and research.
- At 51:49 - "It's earning season, and whose eyes are going to be on the company? All of ours. And what do they want? What do they need? Our money." - Ari explains the immense pressure on companies to look good during earnings season to attract capital.
- At 53:44 - "This is your portfolio, it's your responsibility to do your own research and make your own decisions based on your own research." - Ryan stresses the importance of individual accountability and due diligence for every investor.
- At 58:23 - "We all literally only have today. Yesterday is gone, never coming back... What makes you so sure that you're going to wake up tomorrow morning?" - Ari explains his "go-go-go" mindset, which is rooted in the belief that time is finite.
- At 58:55 - "I'm not scared of death... I'm scared of not living." - Ari clarifies that his intense drive comes from a fear of missing out on life's challenges and experiences.
- At 59:12 - "I don't want anybody showing up to my funeral and being like, 'Man, you know that Ari Gutman guy? Played it so safe his whole life.'" - Ari articulates his core motivation to live a life full of risks and challenges.
Takeaways
- Implement a dollar-cost averaging strategy to invest consistently, removing the emotion and guesswork of trying to time the market.
- Use personal challenges and goals outside of finance to build discipline and prevent emotional reactions to market volatility.
- Broaden your financial knowledge by actively seeking out and learning from investors who use different strategies than your own.
- Regularly review your portfolio objectively, and be prepared to sell any investment for a better opportunity without letting sentiment get in the way.
- When evaluating investments, prioritize total return over a high dividend yield, as a high yield can mask a declining principal value.
- Take full ownership of your financial decisions by conducting your own thorough research rather than blindly trusting financial products or advisors.
- During earnings season, look beyond the headline numbers and dig into the fine print of financial reports to get a true understanding of a company's health.
- Reflect on your personal relationship with time and ambition to ensure your investment strategy aligns with your core life philosophy, whether that is aggressive growth or sustainable balance.
