Money Management Edition
The stock market can be a compelling way to build wealth.
In 1984, less than half of the Forbes 400 ranking of the wealthiest Americans were self-made billionaires. In 2018, 67% were self-made! While most of the wealthiest people become rich as self-made entrepreneurs, stocks are adequate as an asset class and, along with real estate, should be the foundation of any successful investment portfolio.
But, if people continue to venture blindly into stocks investments, they can continue to make countless mistakes. Recently, word of mouth has been a powerful tool to encourage investing in stocks. There are stock-picking gurus, social media posts and advice, and even TikTok advice has become a thing.
The question is, can you truly trust these people? Are they accredited to give such advice, or are they only speaking from experience and sheer luck?
With many sources of information, there are many mistakes that people can make throughout their stocks investment journey, and it’s essential to be wary of making them. At times, they might not even be aware that they’re making a mistake that can potentially cause huge losses.
Join us as co-host wealth manager Lee Michael Murphy shares the biggest investor mistakes for people to sift through the BS and find the best investment techniques that will work for them.
With career advisor Sergio Patterson and attorney Matthew McElroy, tune in to this week’s episode of The Free Retiree Show.
What You’ll Learn:
- Identify the biggest investor mistakes
- How to effectively avoid stocks’ investment mistakes
- The hosts’ experiences and learnings from their misconceptions
To get the episode, show notes, and share links, please go to our podcast page below. Thank you for sharing our podcast.
Lee Michael Murphy
Welcome to the free retiree show. My name is Lee Michael Murphy. I’ve been in wealth manager for last 10 years right in the heart of Silicon Valley. People always ask me, How do I achieve financial independence. And voila, financial world wants you to believe it’s as simple as investing your money. I’m here to tell you, it’s a small piece of the puzzle. I’ve seen four consistent factors in the people that have achieved financial independence. One, they excel in the career, too, they manage your money properly. Three, they’re able to avoid devastating financial mistakes, they can see through the BS. And lastly, they understand they need to learn from the best the people that have achieved success in their career and their finances. Join us on our journey as we learn how to become free retirees.
Welcome into the free retiree show, you’re sitting down with your favorite podcasts on all things career money, and avoiding the big mistakes that people do in their lives. The free retiree show, I’m sitting down with career advisor, extraordinare Silicon Valley mentors Sergio Patterson, what is up everyone in Silicon Valley’s favorite attorney, Matt McIlroy, what’s going on? For today’s episode, we’re gonna bring you a money management edition. And we’re gonna be talking about the biggest mistakes investors make when investing in the stock market. The stock market can be a very powerful way to build wealth. However, there’s a ton of misconceptions and a ton of mistakes when it comes to investing in the stock market. With all the crazy opinions that are out there, the trading system, the stock picking gurus, who knows what’s right, who knows what’s wrong. And you know, with all that out there, investing in the stock market can be intimidating, massively confusing. And, you know, from my personal experience, I think I figured out you know, what works what doesn’t just from making the mistakes myself and the experience in the industry, but granted there’s a lot out there and a lot to be confused about. So Serge Maddy, what are some of the common things that you guys have, you know, experienced with stock market investing and some of the misconceptions or maybe mistakes that you see that are out there?
Matt McElroy
I’d probably say just off the top my head, you know, people’s lack of research and just kind of throwing money into something because they hear a tip or something like that. You got to go and do your own research and, and really be educated about where you’re putting your money.
Sergio Patterson
Yeah, I think this last year, like TikTok investment advice. We’ve all taken it. Maybe not you guys, but yeah, I think the joke was I threw money at AMC. I threw money at Dogecoin I sold AMC, I just those are it’s happening all over the place right now. And like, to Matt’s point, like we don’t do enough research, we’re just like, Oh, this stocks, the stocks gonna pop. But who knows
Lee Michael Murphy
exactly the thing with the pandemic, what we’ve seen is there’s just been people entering into the stock market entering into the investment arena, and they don’t really know anything. And what they are doing is they’re getting advice from nobodies on tik tok and YouTube. And it’s a dangerous place right now, if you don’t know what you’re doing. So, I think for this episode, I’ve come up with six solid tips that I think are really going to help people kind of sift through the BS and figure out their path. So I think this is gonna be a great one, if you are interested in investing, and you want to avoid the big mistakes that are out there. And there’s a lot of a lot of common ones I see. Definitely listen to the rest of this episode. Before we get into it, though, I think that we’re gonna start with a little bit of a, you know, a new addition to the free retiree show attorney Matt McIlroy, you’re an excellent father in you know, he was just sharing some parenting tips about you know, putting Walker to sleep and how to wake up Walker. So Matt, you want to share some parenting advice on how to wake up your child
Matt McElroy
it’d be the same approach that I take to waking you up late. Parenting waking up children Yeah, make your voices abrasive as possible. use cold water throw on them have a weapon to defend yourself.
Lee Michael Murphy
Listeners The reason this conversation started is Walker wakes up mad every morning with data wake up wake up and so Matt tried that same tactic this morning and it was not well received by his three year old if you guys have any questions you know financially accumulated or parenting tips for attorney Matt McElroy right send them to ask at the free retiree show.
Matt McElroy
Do you want to give parenting tips attorney better to receive tips and to give tips.
Lee Michael Murphy
Alright, we’re gonna take a quick break when we’re back. We’re gonna be talking about the six mistakes you need to keep in mind when investing in the stock market. Beijing.
Welcome back into the free retiree Show. Today we’re talking about the biggest mistakes investors make when investing in the stock market. So, guys, just to start off, has there been any things that you guys have, you know, done in the past where the stock market is burns you or you feel like you made a mistake I
Sergio Patterson
should have held on to my AMC shares.
Matt McElroy
I don’t invest in stocks that much. So I haven’t I haven’t really made any mistakes like that. Apple threw on the head. And that’s about it.
Sergio Patterson
I could share I sold, I sold Google my Google stock when I worked there. When it was that 858 52 I think, and this was before I really knew how kind of stocks worked and the potential Google but like, now, it’s close to $3,000 a share. I would say that’s mistake.
Matt McElroy
But it’s hard to see that though, at the time. You know what I mean? And it’s, it’s, it’s all circumstantial.
Lee Michael Murphy
Yeah. So let’s start off with Tip number six. Well, we’ll do it a little bit in reverse order, we’ll go up to number six, and then I’ll build up to number one. Number one being what I think probably the most important one is, but they’re all very important. So let’s start with number six, being a speculator versus being an owner, right. So right now, when you have people that are investing, they’re always thinking about it is the casino, green, flashy lights, red, flashy lights, and you think, well, I gotta sell this and get out before it gets to a certain point. And right now, you know, we’ve talked about this before on our podcast, the difference between being a day trader and speculator versus being an investor. And so the two get intertwined. And people always think, well, I gotta sell this before it drops. Now 95% of people that are in the day trading game fail, right? That’s according to vantagepoint trading company, meaning the amount of money they came in is less after they get out of the game. So there’s a massive difference between being a trader and being an investor. So what do you guys think the percentages are for people that are successful at day trading, meaning they generated a significant profit,
Sergio Patterson
less than 5% 4.5.
Lee Michael Murphy
So that’s the rough average of a day trader making a profit.
Sergio Patterson
So you’re saying there’s a chance? That is the exact message everyone do it,
Lee Michael Murphy
there’s a chance there’s always a chance. Yeah, so that those are the numbers, right. So there’s a significant difference between day trading, stock picking and being an investor. When you are looking at these investments, you need to feel like I’m an owner, right? I’m an owner in this company. I’m waiting for this to make revenue. I’m what I’m, I’m in this for the long haul, right? You wouldn’t start working at a company to get out of the company after they pay you some money Three weeks later. And that’s why you need to change your mindset and become an owner of stocks rather than a speculator stocks?
Matt McElroy
Or do you think part of that is kind of like really believing in the company that you’re buying, or, you know, being on par with their products and believing in, you know, basically their success going forward?
Lee Michael Murphy
100%, that I think that’s one of the biggest parts of this is you have to look at the investment, whether it’s a conglomerate of stocks and companies or if it’s a single stock, you need to look at and say like, I believe in this, I believe that it’s going to generate revenue. And I don’t care if it goes up and down in the short term, you have to look at the long term potential of the company or the market. And if you have that mindset, you’re on the right path. But if you’re have the short term mindset, you’re going to get burned at some point in time. So tip number five, not taking advantage of market downturns. So this one, I’m going to put into two different categories five a and five B, not buying in during the large drops. The thing that I think that works when it comes to stock market investing is doing it consistently month in and month out. But also you get points in time where you get what we call corrections, where the market goes down about 10% bear markets market going down about 20%. And those are in fact opportunities, right? And human nature is to kind of do the opposite of what you should do and you get scared and you’re like, Well, I’m not gonna do anything because this is too painful. And you end up doing the opposite where you put In money during the high points when maybe the markets overvalued, right? So, take advantage of the large drops, though that’s a massive discount upsurge, your wife can she loves to go shopping, the equivalent of you know, going to TJ Maxx and getting 20% discount 10% discount just makes sense. Right. So
Sergio Patterson
why do you think it is that you have the urge to buy at the top end of the market? Is it like the fear of missing out? Yeah, or what do you think it is?
Lee Michael Murphy
I think it is that FOMO feeling when things are good, people want to be a part of it, right? I think you like everything’s go great. I want a piece of that. But you know, when it comes to stock market investing, you know, that can be the worst thing, because you’re getting it, you’re only getting in when things are overvalued and then it goes down. And what I’ve seen as a financial adviser is people continue to do that over and over again. And they wonder why they’re not making money in their investments. Because if you’re only buying in when the markets good, it’s going to mess with your overall return. Right, you have to have that consistency. And five b i would say I would say is kind of associated with the first one, but repositioning can also be very valuable. And I think this is where a good financial manager comes in. If you get opportunities where the market does go down 1020 30%, you have opportunities that pop up, you can look at fixed income if you structure your fixed income properly, and it doesn’t take a big hit during these downturns, which your fixed income shouldn’t if you design it properly, that’s not the case. You know, across the board, a lot of times people have fixed income in their portfolio that’s a little bit more aggressive in nature. And it turns it tends to plummet during times of volatility. If you design your fixed income properly, it should hold its value. And then you can reposition if your situation is if your financial situation is healthy, you can say well, I’m going to sell this fixed income or maybe use some cash that’s on the sidelines. And I’m going to buy these stocks because they’re heavily discounted. So repositioning during the right time can be valuable. When you have a market downturn, I would say do not whatever you do take your money out of the market during a downturn. That’s a terrible mistake. But repositioning to take advantage of a downturn is something that I think is something people should do and not many people do at all.
Matt McElroy
When we talk about fixed income, like what exactly are you referring to like dividends? Are you talking about like, you know, rental income from properties? Or like,
Lee Michael Murphy
what the way I’m talking about is more bonds, right? So you have some bonds that we refer to as like high yield.
Matt McElroy
still buy bonds? That’s Yeah, yeah, that’s still a thing. It seems like an old timey type of Yeah, but it’s
Lee Michael Murphy
not the same way as they used to do it where they would, you know, buy the coupon certificate and put in their safe deposit box with now they do they buy it into, like, they have funds that they buy into, and it’s multiple bonds part of a fund. And that’s how they do it now. But they’re still part of many people’s portfolios. For the majority of people that are, you know, how 401k is, there’s a good portion of bonds in there. And what you see often that I think is kind of a mistake is a lot of people will try to make a high return on the bonds. And when you do that, sometimes you can expose your bonds to more risk. You can go you can lose the quality. And what we’ve referred to in the financial world is junk bonds, triple B and below, you’re getting into that junk category in the you’re going to get a better return during probably normal times. But during the bad times. It’s not a normal to see your bonds tank during times like Coronavirus, or the Great Recession.
Matt McElroy
The thing that issues I don’t I shouldn’t be saying this, but I don’t completely understand how a bond works when you invest in it. I have an idea. But it’s like the way you’re describing it with junk bonds on stuff. It’s like I don’t really have a clear under like, Can you can you give like a little like kinda like a simple overview of what a bond does. Yeah, so
Lee Michael Murphy
think of it as like a debt, and you’re lending money to someone, and they’re going to pay you money back for that money that you give them. Right. That’s the simplest way that I can refer to it. But there’s different types. When you get bonds that are the generally speaking longer in duration, till their time of maturity, there’s there could be more risk associated with those. So if you have bonds that are going out, you know, 10 plus years or 20 plus years, they might give you a higher return or a payment but also during the downturns, you might see their their prices drop during times like Coronavirus and the great recession or any period of economic turmoil.
Matt McElroy
Like Can people default on a bond? Is that is it.
Lee Michael Murphy
Okay? They can’t and that’s the other thing you have to be aware of to if you’re trying to you know buy these junk bonds, there is a chance They can default in you can lose your money on them,
Matt McElroy
right? Is that why they call them a junk bond is because the potential of default,
Lee Michael Murphy
it does it is correlated to the potential of them defaulting. So you can have high investment grade bonds, shortened duration, we call triple A’s, double A’s, single A’s. And those ones aren’t generally going to yield you massive returns, but they’re going to be more consistent, and they’re going to have more safety. And so I think what works really well is you know, when you have bonds, part of portfolio, too many people are focused on building getting a big return on the bond, I think that it makes sense to get your big returns on your stocks, because they’re going to over perform, and then use the bonds for safety, right. So your portfolio doesn’t come crashing down during the tough points. And you have the ability to reposition those bonds, if you’re in the right situation, to make money because you can reposition the bond sell, sell them off, and buy stocks that might be heavily discounted, and then wait for the markets to recover. And then it making, you know, a good healthy profit that way. So
Matt McElroy
what’s like a good return on the bond? Like what like to average?
Lee Michael Murphy
It depends, right, like, so we’re going back to, you know, if you’re buying high investment grade bonds versus junk bonds. I think right now, where interest rates are at it’s the bond market is extremely tough. At this point in time, historically, it can get anywhere from four to 7%. On your bonds, I think that’s a good healthy average. But like I said, the world of bonds, there’s, it’s it’s big, there’s a, there’s a bunch of different types. So it’s all all across the board, but just be just to give general guidance, I would say, you know, use your bonds for safety, and giving yourself different options during market downturns. So I think quality is very important when we come to talking about bonds. So let’s go to Tip number four, not consistently investing. And I kind of mentioned this a little bit before in the beginning, just human nature, right, we have to think about investing at all points in time, not just when things are great people, if they’re left to their own devices, will reduce potential return and make investing not effective if they’re doing it only during the good times. And then you know, selling out when things get bad. So what we want to do is we want to, you know, instead of buying into high or buy into Oh, just invest consistently, I think consistency is key when it comes to getting good investment results. And it’s something that I think a common mistake that a lot of people make
Sergio Patterson
you like automate it, or you say is automating a good way to do that. Like, is there a way to do that right now?
Matt McElroy
Yes, I think some of the apps and apps
Sergio Patterson
can do that. Right?
Lee Michael Murphy
Yes. So you can set up monthly electronic deposit and investment schedule, through your financial institution for most of them. And I think that’s the best thing that works. I think, for me, out of all these mistakes, I think this is probably the one that hit me the most in my investment career is I didn’t invest consistently, I kind of fell into human nature, when things were good. I put the money in and I probably bought in too high. And then when things were low, I didn’t jump in. I think that was probably a big mistake for me. And I think over the last, you know, five years, I’ve had really good results from my investing just because I do it consistently. I don’t think about it, it just happens, right? So every month, the money leaves my checking account and gets invested
Matt McElroy
do but do you pick and choose what you’re investing in? Or do you just have said go twos that are just automatically going for me I have set go twos,
Lee Michael Murphy
I structure my portfolio, kind of like you know how most companies do growth, growth and income, some fixed income international emerging market, I have the basics, but I have a tilt towards smaller companies within those categories. And I also focus on technology and health. And they’re well diversified positions. And it just happens every single month. I don’t think about it, it just automatically goes into those categories. I do however, when the markets take big downturns like corrections or bear markets, I do add in a chunk during that time, but unless those events happen, it’s just consistent every single month. Right. So tip number three, not having a long time horizon. So if you’re investing in the market and you don’t have five years or more, I would tell you, you’re being short sighted. Very important when you’re being a stock market investor, is to have a long time horizon. We don’t know what’s going to happen, you know year over year, but You know, we look at the averages over 10 years, you’re going to have, if you have 10 years, seven of those years, you’re going to do well. Two of them might be down and you have one flat year, those are the rough averages. Right? So what if you get in during 2008? Right? You’re gonna feel terrible. Stock Market recovery, you know, for 2008 was roughly about three years. So what if you got in the year before that the next four years, you’re thinking like, wow, this whole stock market thing doesn’t make any sense. Right. But then after that, you’re doing well, you have a nice solid return. So I think a lot of the risk that’s that’s in the market can be offset by having a long term mindset.
Matt McElroy
Just put that money in there and pretend like it’s not there. Exactly.
Sergio Patterson
Yeah. Like, instead of watching it, sometimes I’ll just watch my Charles Schwab account. Like every day, I’ll just walk. It’s just gonna check on like, what am I doing?
Lee Michael Murphy
Yeah. And that’s the thing is like, we always want to look at it, and
Sergio Patterson
then you start freaking out about it. And then and then that makes you want to sell because you’re short sighted. Yeah,
Lee Michael Murphy
I think I’ve told you guys this before, I mean, I run into people that you know, had all these bad experiences about the stock market, and they’re like, oh, but my real estate’s done really great. One real great advantage of real estate, is that you can’t call someone like me and say, sell it at get rid of it today, right? It forces people to hold on to the the asset, and it’s difficult to get rid of it. And so that’s the I think one of the biggest dangers with you know, being an investor in the market is you can let fear take over, and you can make it instantly bad decision in a matter of seconds. Right? And that’s why you see a lot of people that haven’t done well, is because emotion takes over. And that’s how they make their decisions. Yeah, well,
Matt McElroy
what’s your opinion? Do you feel like people kind of have to go through it and experience these things to really, like, respect it and understand it, you know what I mean? Cuz like, you know, just from my own experience, when I’ve done stuff, I’m like, Oh, I’m not gonna FOMO I’m not gonna do that. And I’ve done it. And then I’m like, Oh, shit, I like it. But it’s like, you don’t really like you know, it’s, it’s not always like you can see it. But you know what, though? I
Lee Michael Murphy
think it’s a great point, I think it’s, you have to be experience, being able to withstand that, because I made the same mistakes. In the beginning, when I started investing, I made those same mistakes. Even though you knew about me, though, I knew, even though even though I knew and it’s amazing, you know, it’s funny, I’ve been at multiple financial firms, and you think these people would have have it all figured out. But you still see a lot of advisers in these firms, the media gets to the fear gets them and they even sell out and make the same mistakes that regular investors do. So I think it’s one of those things where it’s like, you have to have the experience and you have to believe in the data. You can’t believe in the the articles that you see every single day popping up on your newsfeed because the news wants to sell you fear they that’s how they get the clicks.
Matt McElroy
Yeah, you don’t know what’s motivating the article either. Yeah, and I mean, there’s so much like, crap that goes on in the background. 100%.
Lee Michael Murphy
But I think like, if you look at data, in believe in it, that’s the best, that’s the best recipe. And that’s for me, what I’ve learned to do is just, like, tune out the noise and just look at the data. And what’s out there that’s been proved by Nobel Prize winners, that know what they’re doing and just believe in academic data.
Sergio Patterson
Don’t don’t believe in the fluff, take the emotion out and say, like, if the emotions out of it, it seems like people would be better overall, in terms of investing like that. If you take the human out of it. It sounds like if you just wind by data and science and take the human out, you probably do well,
Lee Michael Murphy
you kill it, you do amazing, but it’s, it’s combating human emotion is one of the biggest challenges.
Matt McElroy
Yeah, that’s why I like your tip about like, you know, have the long term game plan, you know, five years plus, because when you do that, those other motion and all those things aren’t going to matter. You’re hoping no matter what, you know, so it’s kind of like a it’s a good way to combat that.
Lee Michael Murphy
Yeah, I mean, more than likely, you’re going to invest and you’re going to probably make money pretty quickly. But those I’m just talking about the abnormal times just think of it as the worst case scenario. Like we talked about 2008 you’re getting in and you know, 2007 height of the market. I mean, it’s gonna be four years probably before you start to see good returns in your portfolio. So have that long term approach and I think if you have that as your mindset, you know, everything else is gravy. Tip number two, kind of miss the kind of touched on this a little bit selling out during declines, right. And why is that so bad? You’re gonna miss the recovery. Right? So common thing you see is people said, oh, there’s a massive market. decline, I’m going to get out of the market. And I’m going to come back in when things get better. The problem with that mindset is the recovery happens very fast. So if you jump out, you’re missing vital days, in terms of making a profit. So it you’ve everyone has this, this ideology that they can jump out, and they’ll figure out when to get back in, that is false, you cannot figure out when to get back in. And missing those big recovery days make a huge difference on the portfolio. So one thing I brought up is, for today’s discussion is report. And there’s multiple reports like this out there, but I took this one from Putnam Investments. And it goes from the beginning of 2006, and goes all the way to 2020. And it talks about if you had $10,000, and you invested it in the s&p 500. What the total return was now I’ll just give you guys this. If you did that, you invest in the s&p 500, and you stayed invested 2006 2006 to 2020, your return was 9.88% annualized. So if you put in 10,000, you end up with $41,000. Well, 41,100, approximate.
Sergio Patterson
That’s over 14 years.
Lee Michael Murphy
Yep. But now, here’s the crazy part. This is what I want you guys to digest this, because this is what I thought was fascinating. If you missed the 10 best days, we’re just talking about 10 days, in that, you know, 14 years. What do you think your rate of return was? So staying fully invested? 9.8, which is killing it pretty good? What if you missed the 10? best days? What do you guys think the return was just 10 days, you’re playing in and out and you miss those and you miss those days? You miss 10 of them that the top 10 of them?
Sergio Patterson
already cut in half? Right? Maybe 4% return?
Matt McElroy
What do you think Maddie? Well, I mean, because you’d be selling at a loss when you sell out a little bit. Right? And then you jump in at a height. So you’re not really yeah, I would say maybe even under 4%. Right?
Lee Michael Murphy
Like not you sold out. You just missed the 10 best days. Yeah, I would say maybe even less than 4%. I would be surprised if you missed the 10 best days out of that 14 years, your return goes to 4.31%
Matt McElroy
Oh, search it like right on the
Lee Michael Murphy
boy, if you missed the 20 best days. What do you guys think that return is?
Sergio Patterson
Well, just math. I just cut it another half right?
Lee Michael Murphy
Yes. 2%? Yeah, wrong. It’s, it’s point eight Oh, shit. That’s what that’s my boys. Right.
Matt McElroy
And the first that you gave us was just holding the whole time. Right?
Lee Michael Murphy
First, I was just held it You didn’t sell out? Oh, wow. And then it’s missing that. So if you just were out for 10 days, during, you know, this decade and a half your return to drop. So 4.31 of you missed the 20 best days, your return goes down 2.88.
Sergio Patterson
So stop being a day trader is what you’re telling us
Lee Michael Murphy
stop this whole trading just got a hold. Because those days that you’re that when the market kills it, that’s where you That’s why you want to be in there. You don’t know when they’re gonna be there. But you got to hold on for that.
Matt McElroy
The thing is, though, is like, I mean, it’s cool, right? Like 10,000 turns into 41 or whatever, like, that’s awesome. But at the same time, it’s like, is that really considered like a good return in the stock world? Because I feel like, you know, tying up your money for 16 years. For what is that like a 3x? game? Like, right?
Lee Michael Murphy
Yeah, I think it’s great. Because think about it as maybe the 10,000 wasn’t a lot. But then you made it to 41,000. And then, you know, 10 years after that, what is that going to turn into? Right? It’s the compounding rate. So it’s like the snowball the cartoon, right? You know, you got we all saw the cartoons of the snowball that rolls downhill. Yeah, it starts off small, but then it just compounds and gets bigger and bigger and bigger. So I think that’s the true power there is. Yeah, maybe if you’re, you know, looking at the small dollar amount, when you start off, you’re like, Where’s the value, but there’s, you know, down the road, when you have, you know, it might be really difficult to get your portfolio from, you know, 10,000 to 100,000. That might that might seem like a difficult feat, but, you know, once you get 100,000, you know, the next you know, eight years getting it to 200,000. Is is easy, and then going from that to almost half a million in 10 years, it becomes something that becomes a reality as well. So it’s like the compounding effect is, hey,
Sergio Patterson
let me let me ask a quick question. Is there ever for a newbie investor? Is there ever a good time to sell? Are you like, How do I know when I do need to sell? Is it more of a situational based like,
Lee Michael Murphy
I need the money I need to sell or what are just forever hold? When you sell you need the money for you need the money for something in your life, whether it’s, you know, schooling for your kids going on vacation, new car, I think those are the times that make sense to sell. But payment or something yeah, selling. I don’t think it’s ever a good idea. I think repositioning maybe like you sell some you sell a position and you buy back in in a better position. I think there’s value there. But selling out completely and waiting on the sidelines. I never, I’d never think that’s a good idea. I’ve just haven’t seen that strategy work.
Matt McElroy
What is like, say like, what if you made like a bunch of money, right? You’re like, Hey, I just want to cash out and not work. It chill. You know? I mean, what do you what do you say to something like that, I would
Lee Michael Murphy
say that you can cash some of it out and use it to have some fun. But it’s always good to have some in there to keep building your wealth for the long haul. The clients that I have that have struggled. They fit a very specific type of ideology. They’re scared of the market, they can’t stay in the market, they sell out of their positions when the market goes down. And those are my clients that struggle and as much as I tell them, Hey, this is not the right thing. They, they just, they’re like, Well, yeah, we understand it. But you know, we’re scared and we decisions would make us feel better. And I’m like, Alright, that’s the way you want to do it. And those are the ones that have struggled, their retirement is tight. So I just think, you know, being invested. At some way, shape, or form is the right decision. And plus, that’s how you’re gonna offset inflation right now, if you got a bunch of money sitting in cash on the sidelines. I mean, inflation was already, you know, a problem before Coronavirus. But now you’ve just printed massive, massive amount of money. Inflation is going to rear its ugly head and you’re going to look at you have to look at it like your cash is losing money every single year. And the only way to offset that is to be an investor, you have to invest in real estate or you have to invest in the stock market. That’s how you’re going to combat that. Going back to the stats. If you missed the 30 best days, during that timeframe that we were talking about the 15 years, your return is negative 1.88. So you would have about $7,526. And if you missed the 40 best days, your return is negative 4.26. So you’d have about $5,205.
Matt McElroy
That’s almost like day trading, though, right? Because at that point, you’re making multiple moves a month, then you know what I mean? Yeah, you’re falling into that line. So it’s like, it kind of proves like, the more you try to be strategic and do the day trading thing, the more you’re just gonna lose. Yeah, long term hold.
Lee Michael Murphy
It’s right. And, you know, all the searching that we’re talking about this before, but there was a stat that I saw on the companies that sell trading systems. You know, they give you a you pay them $30 $50 a month, and they give you this report, the profits from those companies. 99% of them is from the system or the book that they’re selling. They’re not making money from their own recommendations. So they have all the slick advertising about like, we know all this stuff, and they’re only making money on selling to people like us, but they’re not making money on their investment recommendations. So it’s just, it’s messed up. And let’s go to tip number one, the number one biggest mistake, not being in bested. So we kind of alluded to this through this whole discussion, but time in the market, not timing the market is the most important factor to success in investing in the stock market. Being out of it, is probably the biggest mistake. And just to give you guys an example. I remember back in 2013, I was working for a company and we had this company called SCI come into our office and talk about what they saw in the market. And these are the people that are extremely respected in the industry. They have great analysts and they’re talking about in 2013 that they saw this massive market correction and they were they were scared about it and they weren’t putting their money in it. They were waiting for that drop. 2013 I heard that story. 2014 I heard the same story from both Book companies 15 1617 1819. I heard that story every single year, that story will never go away. It will happen every single year, you will see it in your news feeds, you will hear from people. That is a story that happens every year and it can keep, it can get you paralyzed, and you won’t take action and you won’t be invested. So, all the way till 2020 there was a drop, right? Actually a substantial drop. There was other small corrections during that time, but nothing substantial. Then we had Coronavirus, and we had a substantial drop. But it was short, and things recovered. So think about it if you were waiting during this past eight years now, to jump in how much money you would have lost. Right? So I think that’s the biggest mistake not being in the market. So if you’re someone that you know, thinking about it, stop overthinking, just do it. Yes, you might get in at the worst possible time. But if you stick it out for five years, you’re more than likely going to be happy with your decision.
Sergio Patterson
So those are my tips, guys. Good stuff. last one’s important. I was thinking how like correlating it to the real estate market. And how we’ve been saying it’s gonna crash, it’s gonna crash. It’s gonna crash. I feel like I’ve been saying that for like, five, six
Matt McElroy
years. Like the best ever.
Sergio Patterson
Best Ever, like, you can’t even find a house. Everything’s going out. We’re over asking, but I think it’s similar, right?
Lee Michael Murphy
I think it is similar. I think it’s like you want to get the best opportune time to get in. But sometimes it’s, it’s more about just doing it and getting in because I think Real Estate’s a great investment. I think stocks are great investments. And that’s, I think the biggest thing is just get in it. So you can experience those gains. If you get in during the wrong time. Time will work itself out and it will become an a great investment, the more time you’re in it,
Matt McElroy
especially with inflation, too, right? It’s like that’s a good recipe to really kick up property values in the long term.
Lee Michael Murphy
Exactly. There’s a lot of people saying how do you deal with inflation right now, on real estate? That’s going to be a great way to combat inflation. So
Matt McElroy
what about cryptocurrency?
Lee Michael Murphy
But the moral of the story is, you know, be invested, don’t wait on the sidelines. Alright guys, that’s it for this episode. Thanks for joining us. You’ve been listening to the free retiree show so long for now.
Securities offered through Securities America incorporated member of FINRA ww dot FINRA, SIPC, WW. SIPC, though is a separate entity. Michael Murphy is licensed for the California Department of Insurance license. 00 h 18660. Michael Murphy is a investment advisor representative with Securities America advisors a registered investment advisor to pre retiree Securities America advisors and Securities America incorporated are separate entities career advisor Sergio Patterson attorney Matt McCoy are not affiliated with securities, American advisors or securities American incorporated securities, American advisors securities American corporate and its representatives do not provide tax or legal advice. Therefore it’s important to coordinate with your tax or legal advisor regarding your specific situation. To constant heard in this podcast is not intended to be tax investment or legal advice and is intended as general guidance only. You should contact your own tax advisor, financial advisor or attorney to answer questions about your specific situation or needs before acting upon this information. Third Party source information or comments are not verified may not be accurate and are not necessarily representative of all client or audience experience. A portion of this event was paid by a third party. The opinions of career advisor Sergio Patterson do not reflect the opinions of LinkedIn incorporated or Microsoft Corporation. The opinions of attorney Matt McGorry do not reflect the opinions of kasnia and company