Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.
Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [0:26.1]
Brad: Welcome to Make your Money Matter. The show for truth seekers who are fed up with outdated financial advice. My name is Brad Barrett, I'm a Managing Director and Partner here at One Capital Management. And it's my goal on this show to reaffirm what you know, to be true and to challenge the advice you may have been told is true. Here at One Capital, our mission is simple to help our clients and you listeners live well and not just survive, but thrive. Friends, we live in a world where we are consuming information at warp speeds, and it's easier than ever before to access information yet more difficult to find the truth. And that's what we're after because after all your money matters and knowing how to plan your financial future is vital to your financial success. If you've listened each week and you're subscribed, thank you. If you haven't go to our website at onecapitalmanagement.com on the media tab, you can click subscribe, or you can go to any platform where you download your podcasts and type in, Make your Money Matter, and you can subscribe. [1:26.9]
And as this show reflects our philosophy here at our firm at One Capital Management, where we advise and manage on over two and a half billion dollars for families nearing entering an already into retirement and inherent in that it's a fiduciary responsibility to protect those assets. And today's topic about the six things to avoid when it comes to investing in the stock market, it ties in exactly to what we tell our clients on the advising side and really what we try to manage around if you will, on the portfolio side. And I want to start by asking if you think about it, I mean, do you ever have trouble getting started tackling a project or some to-do lists once you start, you never finish it. You know, maybe you're waiting for that perfect time, which never really seems to come, or maybe your, your pursuit for perfection tends to end in utter frustration. I mean, are you looking to get more done with less frustration and increase your happiness? Cause that's what I want to focus on today when it comes to perfecting an antidote, if you will, to help address your investment concerns because we're sharing those these six, what I call common investor snags to avoid getting tangled in. [2:34.7]
And over the years and 15 plus years in this business, myself, you know, I've had no shortage of reasons from investors as to why they can't get their financial house in order, you know, while the art of procrastination, as I mentioned earlier, takes many forms. A common theme I've noticed is the quest for perfection. Investors typically look, they're looking for, you know, this ideal set of circumstances, which never really seemed to materialize and they keep putting off the important planning that needs to get done. I've talked about in previous episodes as well. And this search for perfection is similar to, let's say the world of dating where searching for that perfect mate can be a hopeless endeavor. Every person has flaws and every no relationship comes without its wrinkles. You know, embracing this truth can ultimately lead to a courtship and a relationship and hopefully a successful marriage. Now while denying it may lead to years of unintended singlehood and it can be the same way you're looking at investing. In many facets of life in fact, the quest for perfection is really the enemy of progress. This is especially true as I mentioned, the world of personal finance. The below list that I'm gonna go through. It highlights several areas in my opinion, within the search for perfection that prevent people from, let's say, pulling the trigger on a financial strategy or even sticking to a financial strategy. And I believe in why I want to talk about it today on this podcast is investors should be aware of these traps. We need to talk about them and not let them inhibit their ability to achieve their financial objectives. So, let's dig in. [4:02.6]
As I mentioned, a few minutes ago, waiting for the optimal time to invest is investor snag number one, I'll call it. It reminds me, so last week a prospective investor called me from our radio program, Make your Money Matter. And they call me or to confess that she really needs to start investing since most of her wealth, which is outside of her business is sitting in cash. And after inquiring as to how much cash was sitting on the sideline, she told me about seven years worth of expense money. You heard that right, seven years. She said, I'm just not comfortable with what's happening in the market. I'm waiting for things to settle down. By the way does that sound like something you've been thinking about lately? Also, I want to talk about today. So, while keeping that level of cash on hand is an extreme example. It is common and I want to be open about that. We see it all the time here at One Capital Management, when we're doing our discovery meetings. It's common for people to want to wait for an ideal time to put their money to work, but in truth, there is never a perfect time to invest. There will always be some type of turmoil in the world that gets people nervous and gets their attention. War, geopolitical risks, market gyrations, increasingly high stock valuations, a global pandemic. And there's plenty more so trying to time the market for the best entry point could really just lead to years of waiting. [5:21.3]
So that's number one, number two, searching for the perfect investment. Every investment carries risk. I think everyone listening here should know that. Sometimes investments work out and sometimes they don't. The purpose of taking risks. If you want to really break it down is to generate a return on one's money. So, an investor who spends an enormous amount of time searching for a perfect investment opportunity, namely one that provides high returns with no risk is really a fruitless pursuit because that doesn't exist. It's far better to spend time developing a strategy that provides a high probability of achieving an investor's financial objectives. This is done by clearly defining our investors, our clients here at One Capital Management, your goals and your risk profile, and then outlining an overall asset allocation and a sensible plan to get you there. [6:12.5]
All right so, number three, on the six things that I think investors should avoid when it comes to investment snags or little hiccups is insisting on getting the best price. So, if you think about it after agreeing to an investment strategy with a client, let's say sometimes investors are hesitant to implement it. They'll often say things like I like what we discussed, but let's keep an eye on the investments. You've mentioned when the market drops below a certain price, then give me a call and we can discuss moving forward. Does that sound like something you would say? Many clients do so it's not uncommon. So, this year in particular was right for this type of conversation. And by this year, I mean, kind of this rolling last 12 months from what we saw in 2020. And after the stock market dropped then of more than 30% in March, many investors understood that adding money was a good idea since then stock market at the time was trading well below its highs. However, taking the plunge and actually adding money to the market proved difficult for a lot of people. And that's all I want to talk about it today, because this is again, one of the reasons why having a good investment manager who also happens to be your investment advisor is a really good advocate to have in your corner during exactly times like this, because it's human nature to want the best deal. [7:29.6]
I mean, anyone out there, whether you're buying a car or buying a stock, you want the best deal. That just makes sense. That's human nature. That's not uncommon at all. However, waiting for a stock in particular to trade at some arbitrary price often leaves the investor pretty much waiting indefinitely. So, if you have a prudent strategy in place, something that we here at One Capital Management really define for our clients, something we do as our investment policy statement and allocation and an overall investment strategy that fits into your overall wealth manager strategy, then hoping for the market to trade at certain levels is ill-advice. Moving forward immediately with your strategy is generally the right decision. Market timing is something you gotta be very careful of. Warren Buffett once said, there seems to be some perverse human characteristic that likes to make easy things difficult. Don't make investing more difficult than you have to make it understanding your philosophy that you're trying to bring into the table. We will sit with you as an advisor to help you design your investment policies statement and let's implement. Let's move towards the long-term strategy, which is what we do here at One Capital Management for our clients, and make sure that we stay steadfast in your systems that will get you to the golden objectives we're designing. So, market timing you have to be very careful there and insisting on getting the best price is a slippery slope. [8:51.6]
And this leads us into the fourth topic I want to bring up when it comes to things to look at or somewhat avoid when it comes to investing is the desire and the, and the wanting to create the perfect portfolio. There's an infinite amount of literature on portfolio construction. Do a quick Google search and you will find white papers, write-ups articles, books to buy, videos to watch all about how to construct the perfect portfolio or a portfolio. And to investors with the same risk profile goals and time horizon. They may have different portfolio suggested to them by various different investment firms. All of those portfolios may be reasonable. In fact, the more you read and learn and research, the more you'll conclude that there is no one correct way to invest in the market. There are only wrong ways. It's irresponsible to develop an overconcentration in any given stock or sector industry. Furthermore, allocating your capital exclusively say to illiquid investment vehicles or esoteric and unregulated opportunity is also maybe not the most recommended for most investors. Again, a far better approach and what we, as a philosophical endeavor we have at our firm, a better approach to portfolio construction is to embrace diversification, embrace liquidity and good solid, fundamental investments. [10:18.9]
This philosophy, by the way, it will protect the investor against all risks because in risks are inherent in what we do in everything in this world that we do. No investment strategy can do that. However, simply doing what is prudent and to some may seem boring is usually extremely effective. Let me expand on this for a second and ask the question. Have you ever played monopoly? A lot of us have, right. So, what happens when you circle the board? You collect $200, right? What does that $200 represent? Wages. Do you remember anyone? Whoever won the game by just circling the board and collecting their $200? Probably not. So, to win this game of monopoly as a quick analogy, you have to invest in properties and hotels, so you can collect the rent too. So, isn't it the same of our market, if you think about it? To win in the market, you have to invest in the market and by waiting and trying to find that right portfolio and that right investment can really just make you keep circling that board and collecting a bunch of cash, small little interest you're making on your cash or money market accounts without getting into a properly diversified multi-asset allocated portfolio that's geographically worldwide, that also fits into your overall retirement plan that you're trying to build. [11:32.4]
So again, my biggest advocacy here around finding that partner, that trusted advisor, that's not only just your financial advisor, but also your investment advisor because planning and investments, as you heard me say on this show, many times go hand in hand. All right, putting off, saving until attaining an ideal career situation. I put this number five because in my experience over 15 years of doing this, I've had a lot of conversations with entrepreneurs and different executives that may be on leave and looking to go to a different company. They start putting off savings until they're attaining this ideal career situation. I think we've all been there, especially young professionals when they come to me and they come to us here at the firm, I always encourage them to save as much money as possible into their company's 401k plan or their corporate retirement plan. [12:19.9]
A common retort is I'm gonna hold off on saving for retirement until I get better situated. My cashflow, isn't the greatest and I anticipate being able to save a lot more when I get promoted. Now this could be the wrong mindset and why I wanted to bring it up here as our fifth thing to discuss. So, when you're young with fewer responsibilities and financial commitments, that is generally the best time to save additionally, by the way, putting money away while, you are earlier, earlier on in your career, allows those dollars to benefit from compound interest. So, decades of letting that money grow can meaningfully benefit your financial future. Now I've always said this, thankfully many corporate retirement plans incorporate something like little nudges, if you will, right that help employees to save more seamlessly. These nudges include automatic enrollment, automatic escalation of the employee’s contributions, things like that. Cause doing nothing and allowing these automations work, they work, their magic is often the right decision. [13:20.5]
And so, if you're putting up savings or trying to understand how your savings or investing related to maybe paying off some debt, that's where advisors come in to help with that. In fact, next week on Make your Money Matter podcast rushing me talking about how to manage debt of any amount, because it tie into savings and investing, but being careful and practical and almost pragmatic by putting a plan in place to understand how something like I just mentioned debt, or again, holding off, let's say specifically on obtaining some career goal before you start saving can be a dangerous slope because years can go by and that's less years to save during your accumulation time period. And I said this a few times, so there's really three phases of someone's life when it comes to the financial arena, right? There's the learning phase where you're getting education, learning your craft or your trade. And then there's the cumulation phase, which tends to be the largest phase could last 30, 40, 45 years where you're working in saving and working and saving. [14:19.6]
And once you to finish, if you will, that accumulation phase, that's when you start the distribution phase. So, starting that clock early on the accumulation phase of your life, that working in saving life for many of you listening right now, you're in that phase, whether you're getting closer to retirement or you're closer to the beginning of the accumulation phase, getting that retirement plan set up that funding for your IRA or your SEP IRA or your Roth or items like that, or maybe it's just an after-tax savings. Having a goal aligned with that and an investment that fits all those needs is vitally important to make sure you get to your ultimate goal which many of our clients here at one capital have, which is a happy and healthy retirement. [15:00.1]
And to round out our list of the six things I think financial investments or those of us investors that should avoid is holding off until you're in a comfortable life situation. It kind of dovetails off of number five of holding off until you have a specific career goal or something obtained in a career situation. But a lot of people I meet with are holding off until they're in a comfortable life situation. Right now, this has to do a lot I talked to a lot of my buddies, right who are not married yet let's say they're kind of waiting to get their financial affairs in order. And the reality is that may never happen unless you start planning to eventually ask their girlfriend of many years whom they love dearly to marry them. So, it happens a lot. And the events in one person's personal life are often another deterrent to getting started, whether it's again, buying a home, going on a special vacation, a sickness or a death. I mean, there's always personal reasons to put your finances on the back burner. Unfortunately, the perils of being alive are constant. Holding off for when your life “normalizes” is really a recipe for in action. [16:05.5]
So similar to the nudges that I mentioned that are built into corporate retirement plans, you don't, you can also build automations into your own personal financial affairs by setting up small amounts of money, to go into an investment account at what we call regular intervals, something, a strategy called dollar cost averaging. You do it right now. If you're contributing to your 401k plan, and let's say you get paid bi-weekly and every two weeks, when you get paid, yeah, a a hundred dollars or $200 into your 401k plan, you are dollar cost averaging into the market. So, you can actually, we put strategies in place in your own personal financial affairs for after tax savings, whether it's $50 a month or a hundred dollars a month, we can help align that with you to make sure that you're building up your liquidity so that you have that cash on hand, as well as your investments working for you for the future. [16:54.9]
And when you talk about these small automations, typically an investor, you probably won't miss the modest amount of money that you're putting over into this investment, the portfolio, and even a small dollar amount every month can slowly accumulate wealth. And by the way, in this instance, hiring an advisor is a wonderful way to help use an investor move in the right direction no matter what life throws at you. I find constantly, and my colleagues here at one capital management as advisors, our job is to not only understand the numerical data, like I mentioned, the numbers, the assets, the cashflow, we will go through all that, but also understanding you, your behavioral finance traits. And what has maybe been holding you back, whether it's concerns about politics, concerns about market volatility or your own situation of your job, or maybe your personal life, your debts, those all need to be brought up and talked about. [17:48.5]
Because in our first meeting in a discovery meeting, and by the way, I should be very clear here we here at One Capital Management offer a retirement track review meeting. It's complimentary to those of you listening, who aren't clients of ours. You can give us a call at (805) 410-5454. You can also text us, text the word track T R A C K to that same number (805) 410-5454 and we'll reach out to you to set that meeting, cause it's for you. Set that time, meet with one of my advisors. They're incredible at helping you discover really what your goals and objectives are for retirement. Everyone on our advisory staff is seasoned veterans who've been there before. You want that in your corner to avoid some of these six things I mentioned today around the investment world, because as the name of this show is so aptly named your money matters. It matters to you and what you want to do with it. So, don't get hindered on the sidelines by fear or anxiety, get a plan in place, stick to that plan and let us as your advisor help you maintain that plan for years to come. [18:53.5]
Thanks for listening to Make Your Money Matter. If you haven't subscribed, you can go to our website at onecapitalmanagement.com. You go on the media tab and click subscribe, or you can go to anywhere where you download your podcasts and type in, Make Your Money Matter. Subscribe, let us know what you think and if you like this podcast, listen to us on the radio, the Make Your Money Matter, radio show. It's a longer format with more to be discussed. It airs every Saturday morning at 6:00 AM and 10:00 AM on KV TA 1590 am. As I mentioned earlier next week on Make Your Money Matter, we're going to be talking about how to manage debt, debt of any amount. I'm looking forward to it and remember Make Your Money Matter. [19:31.3]
