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Whether it’s politics or social occurrences, the market is always changing. And you shouldn’t have to worry about what’s happening around the world to protect what’s in your portfolio. 

Finding sustainable investments is not about trying to “predict the unpredictable,” but becoming adaptingable to any disruptions. Will your investments make you money tomorrow?

In this episode, you’ll discoverlearn how to find profitable investments in any political environment and what the current market means for a plan that fits your future. 

Show Highlights Include:

  • Why the Meghan Markle and Prince Harry interview directly relates to your skepticism of markets today. (1:28)
  • What 401k plans reveal about political environments – and how to instantly protect your plan (no matter who’s elected). (4:38)
  • How to make market disruption a part of your investing and why every portfolio needs a ‘see saw’ effect. (8:37)
  • Why planning a prosperous retirement starts with skepticism and social media. (11:37)

To schedule your free retirement tracking meeting, specifically for first responders, head to http://pensionattention.com/ or call us at 805-409-8150.

Read Full Transcript

Welcome to Pension Attention, the best show for first responders who want to take control of their finances.

After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]

Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are at whatever stage in your career you are in, in order to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at ONE Fire and Police are dedicated to ensuring you take control of your finances and build the life you deserve. To find out more about me or my team here at ONE Fire and Police, you can go to our website at PensionAttention.com or you can give us a call at (805) 409-8150. I want to thank each of you for tuning in each week here to Pension Attention, and please make sure to subscribe and leave a comment, always good to know feedback. You can go to our website again at PensionAttention.com you click on the media tab and you can there click download and subscribe. You can also go and download it on any platform where you would download a podcast, whether it's Google podcasts, Spotify, SoundCloud, or even the iTunes app and there you can leave a comment for us. [01:26.9]

Okay, I'm going to bring it up. I know you guys are thinking it and I'm going to bring it up. The Megan and Harry interview, have you had enough of that two people who had a $42 million taxpayer funded wedding who live in a multi-million-dollar lifestyle, decide to go on national television during a pandemic at a time when three and a half million Americans are receiving unemployment benefits and they want to tell us how bad their life is. By the way, the ratings for that Sunday night interview a couple of weeks ago were huge, apparently 17.1 million viewers watched. And it's reported Oprah made $7 million for the interview, not bad. You know, monarchy is the oldest form of government in England, but it has evolved into a constitutional monarchy, meaning that while the Royal family remains the sovereign head of state, they're a freely elected parliament that actually creates law. But the Royal family plays an important role as a symbol of British pride and virtue, maybe as well as a symbol of continuity and stability, which by the way, spans the last like thousand years. And looking at that Sunday night interview with two spoiled children, devoid of any reality or sympathy for others who were swept up in the carnage of this pandemic, I saw no pride, no virtue. And I sense that this might just be the end of a thousand-year reign. Maybe I'm just ranting, whatever. That's my thought. [02:52.6]

And as I was looking through some of the clips from this interview, it got me thinking about politics and our economy. We all know that they sit, tend to be tightly linked, even though they are completely autonomous from each other for a large part, we are a free market, mind you. Now there are regulations that come from Washington DC that the free market has to adhere to, as we all know the biggest one being taxes, right? But the reality is they do work hand in hand sometimes, one affects the other. And right now, many people believe that the biggest threat to America's economy is our country's polarized political environment like Roman gladiators or something, Democrats and Republicans are facing off in his Coliseum, known as Washington DC, and his combatants each thirsty for the other's blood. But unlike ancient Rome, there are no cheering crowds of spectators, just an electorate who's getting increasingly frustrated with entrenched career politicians, wasting time and barrels full of money fighting each other, rather than working together to make their constituents lives better. [03:56.6]

It's a constant political battle and the result, which is why I'm bringing it up today, as it relates to investing and retirement planning, the result is skepticism. I'm sure many people listening right now feel somewhat skeptical about your investments, your deferred comp plan balances, your personal savings account. Many of my clients we've talked about this, who've had our quarterly review. We've talked about this notion about what's going on in our economy. This last couple of years has been very wild and interesting, right? There's been a lot of discussions as it relates to the fundamentals of our economy, but there still is this skepticism that's out there in any reasonable person would especially right now. Let me give you a little background on how we arrived at this moment, in my opinion, and to do that, I need to go back to 1980. You know, the entire 20th century up until 1980 America's investment markets were primarily the domain of corporations, the very rich. The average American didn't hold stock investments. But in 1980, something did change. [04:55.8]

Do you remember what you were doing in 1980? Probably trying to forget at this point, right? But I can tell you one thing that you probably weren't doing in 1980, you probably weren't investing in mutual funds. Hardly anyone was, just 5.7% of U.S household owned mutual funds at that time. And believe it or not, there were only 564 mutual fund companies in existence. Today, roughly 45% of American households own mutual funds. And there are about 8,000 mutual fund companies, all vying for the business of retirement plans. You know, the 45% of households that own mutual funds has been pretty steady, believe it or not since the year 2000. In other words, from 1980 to 2000, over that 20-year period mutual fund ownership skyrocketed from 5.7% of household all the way up to 45%. So, you're probably going Brad, what are you talking about? What happened? Politics. You see the first 401k plans or traditional ERISA (employee retirement income securities act) like your deferred comp plan, those plans were introduced in 1980. And what do you think was the primary almost sole investment vehicle used in those plans? You guessed it, mutual funds. And as a consequence of 401k plans, mutual fund ownership skyrocketed in the U.S and helping cement, the case to use mutual funds was the great market run-up that we experienced between 1980 and the year 2000. By the way, thanks Ronald Reagan for the eighties. Appreciate it. [06:23.0]

It was somewhat of a golden age for retirement mutual funds. If you go to Yahoo finance or other financial websites, and you look at the period between 1980 and 2000, believe me, you'll probably be pretty impressed with the S&P returns, but in the year 2000 falling this golden age of impressive returns, something happened. Do you remember what you were doing in the year 2000, other than making New Year’s Eve plans? Well, in the year 2000, in addition to recovering from your new year's hangover, the.com bubble burst and the S&P 500 began to decline. And immediately following that the very next year, the U.S experience its worst terrorist attack in history, the unfortunate September 11th, 2001. So, for a market that was already in decline in the year 2000, it declined even more, 2001. Over that two-year period, the S&P fell about 34%, a significant drop, I would think by anyone's standards. And it probably doesn't need any reminding that's the September 11th terrorist attack was not just a normal economic cycle. It was a geopolitical event that no one predicted it came as a surprise. It was a black Swan event. It was terrible, but it did cause a major disruption in the U.S markets similar to today's coronavirus and a thousand other like occurrences that have happened before. [07:34.7]

But that's what markets do. They react to events, things that happen domestically and around the world, some predictable, some completely unpredictable, random events and what we call black swans. So, if markets, again, we sometimes look at what a market is and I talked a couple of weeks ago about what the Dow Jones industrial average was. I decided to dedicate an entire episode to talk about the history of the Dow, what it means, why it's an index that we all use, because we all tend to refer to it as again “the market.” But the market, isn't a human being. It's not one singular person. It's all of us collectively. And the companies that represent those investors that are investing in these companies and the consumers that are using the products and services of the companies in our market. So, understanding how markets move and reacting to events can bring about skepticism, can bring about who I don't know about that one. I wonder if that's going to effect, you know, X, Y, and Z. So, understanding how that fits into your retirement plan, your investment planning makes a lot of sense, right? [08:36.7]

Being able to take your investments, the portfolio that you're building, building that to sustain market disruptions is of utmost important for any good investment manager, protecting your losses, making sure that you have good diversification. And again, I know I use word a lot and it's so overused in our industry, but it's so important to making sure that in the same event, if one stock let's say reacts negatively, you want to find something that's uncorrelated that acts inversely so that you have this Seesaw effect within your portfolio. And a good manager will diversify that actively manage that rebalance that, and over time, disruption can become a part of your overall investing. This also goes in line with your contributions, making sure that that fresh capital coming in every other Wednesday and your paychecks is going to purposeful planning, not just going into the funds automatically every Wednesday, like happens with, you know, the core funds, making sure that we put a plan in place for all aspects of your portfolio and how disruption in markets can play into it. So that the next black Swan event, which there will be, I'm not here to say what it's going to be because they are unforeseen and unpredictable, but there will be events that will move markets good or bad. [09:51.5]

Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the drop program? Go to www.pensionattention.com to find out how we can help. [10:07.5]

And I think any of you listening, who were in the markets in 2000, 2001, it was kind of a wake-up call for the average investor. You know, as the 21st century progressed the sound of the alarm, it only got louder and louder. And then we came up to 2008, 2009, where we saw a market decline of about 40% in the S&P and we saw us markets become progressively more sensitive, I think to geopolitical occurrences, you know, events happening around the world. By the way, technology was advancing at lightning speed, spreading news, pretty much instantaneously around that time. And markets reacted in real time. You know, something would happen and markets would respond immediately. Geopolitical outside forces increased the likelihood of a crisis and boy did we experience several. Technology had changed the world and at times it's disruptive. If anyone questions that statement, by the way, I would suggest they visit nearby blockbuster and rent a DVD on the subject or maybe you guys pull up to a borders books and read up on the subject or better yet maybe you could pull out your Blackberry and research the topic technology advanced a lot of things and advances often cause disruption, especially in investment markets. And there's been a lot of disruption, I think we all could agree with between the year 2000 and 2020. [11:22.8]

And because of it, Americans became more cautious I think about investment markets. It's much more top of mind about what's going on politically or geopolitically than ever was before, because things are happening so fast in a real time. Social media, when I talk about technology was one of the main drivers of all that happening in real time. And over the last five years or so, the caution has grown into skepticism. Wouldn't you think? So, when you think about the timeline, I've laid out this morning in 1980 5.7% of American households own mutual funds, but with the introduction of 401k plans or retirement plans, that percentage is skyrocketed to 45% by year 2000. And during the same 20-year period of time, the S&P 500 just kept going up and up. All of which created this kind of golden age for mutual fund companies, but when the.com bubble burst and the unfortunate September 11th terrorist attack in 2000, 2001, investors started going cautious. And slowly over these next 20 years through the crash of 2008 and other less severe market declines I say, investors caution evolved into, I guess, what I'm considering skepticism. I'm talking about this today because it's such a topic that hits us emotionally when it comes to our investing around again, political environments, or just what's going on in our own economy and community and coronavirus has obviously pushed that way more to the forefront on a lot of things because markets definitely do react. [12:46.8]

But I think many of you listening right now will look back at this last year and say that didn't react how I thought it would, which leads us to some sort of notion around, Hey, look, fundamental free market planning still fits. It always, it's the modern portfolio theory of having a well-diversified multi-asset class global allocation for clients. Managing that on an active basis, rebalancing that base to strategy makes a lot of sense. It also helps with the conversations that I have with clients in many of my clients may be listening right now around the skepticism I'm talking about. We all have it, we're human, we're all on Facebook or Twitter or Instagram or whatever it is you're looking at, whether it's also on Fox business news or something like that when it's, news-related, everyone's trying to push an agenda. We all can feel that nowadays. And that agenda is hits us in our core sometimes more about skepticism, more about who's in office, who's not in office, right? And these things have a lot to do with how we look at investing. Some positive, some negative. And so, our job really is to make sure we sit with each one of you to understand where you are in that overall skepticism. [13:53.6]

And also making sure that that by the way is not a negative word. I'm not saying it's a bad thing. It's just important to say, Hey, we have a gut reaction and a feeling towards stuff that's going on. We want to talk through it because it does have an emotional and logical effect on how I want to look at investments or how I want to look at my deferred comp plan. And if you're thinking about that right now, and you're not talking about that with your advisor, that's the time where you start needing to make sure, Hey, what does this mean for me? If you've got, you know, a couple of years on the job right now, and you're kind of looking at, okay, look, I got, I got plenty of time, Brad. I don't know what you're talking about right now. I promise you if you talk to anybody, who's got 15, 20, 25 years on or retiree, the sooner you start planning, the better. The notion of man, I wish I'd talked to someone 10 years before is heard quite often around our office. We don't want to take that for granted. We want to be really; we want to honor that. Why I want to do this podcast each week. Why I liked being at stations when I can get back into stations is talking about that advocacy around making sure that your deferred comp plan, the hard work you're putting in now is stewarded in approach that makes sense for you. Not for someone else but works for you, whether it's cashflow, planning, managing debt strategies, all of which lead into talking about investing. And the notion of today around skepticism, thinking about how political environments tend to drive us in certain directions and making sure that that fits. long-term not just in the topical moment. [15:16.1]

So, if you haven't done that and you want to talk to us, you can give us a call at (805) 409-8150. You can also go to our website at PensionAttention.com. You can set some time with myself or with Toby or one of our advisors here at ONE Fire and Police. We’ll be able to sit down with you and go through retirement track review meeting for your retirement. Meaning your deferred comp plan, your pension and forecasting that the drop VC and SK time, sitting with someone that's experienced in this world of first responders that's all we do here at one foreign police, that's our focus for you. So again, you can give us a call at (805) 409-8150. You can also go to our website at PensionAttention.com. You can set some time with myself, Toby or one of our advisors here at the firm, and we're happy to go through your goals and objectives, to be able to build out your retirement, to live a happy and healthy retirement. [16:06.3]

Thank you for listening to Pension Attention before acting on anything discussed today, remember speak with a financial advisor near you about your specific situation, or again, if you'd like our help, you can visit us at PensionAttention.com or give us a call (805) 409-8150. Next week on Pension Attention, we're gonna be talking about significant dates in your life, not just your personal life, but also your retirement life. I'll explain more next week and I'm looking forward to it until then stay safe. [16:35.6]

The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [16:58.7]

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