Here's a question; this one is from Robinette. I think I pronounced that right. She says, "Inflation has been cooling to just 3%, so we came through a high inflationary environment. It's come down some according to the latest data, but the FED is expected to continue raising interest rates. So let's see, I want to know if you agree with that. So with that, and with student loan payments about to restart here in the next couple of months, could that throw the economy into a recession? Is that something I'm ad-libbing now? Is that something I should be worried about? Is that something I should be concerned about? That, man, there are some recessionary indicators. How should I navigate that when it comes to my financial life?"
"Yeah, we've done a show, and I loved how we did it. Please don't let Fox News or CNN be your investment advisor because whenever we let the news media, your politics, or any of those, or even you trying to pontificate yourself lead your investment decisions, you might be surprised to find out that you were wrong. It happens all the time. I mean, I've shared where we've had clients who've sold out of things because of volatility, who've sold out of things because of politics. But I always say, guys, clear the air. Here's the reality of the situation: always be buying (ABB), baby. Because the reason ABB works is that it doesn't allow your behavior, it doesn't allow your blind spots and other biases, or things you just can't think about. You might be wrong, and you're going to miss out because not only do you have to get it right on the prediction you're making, but you have to get it right on when you get back in. When you're dealing with a system, the law of accelerating returns, and knowing historically, 8 out of 10 years markets are going up and making money because humans innovate, we grow, we expand. Instead of trying to beat the market, just be the market. That's why we talk about index investing, and we even make that easier by talking about Target index retirement funds. So you just choose how much you can save, when do you need it? Because then, the rest of that gets answered by the diversification of how much is safe assets versus how much is aggressive trying to grow. You do not need to be worried about all this stuff, Robinette, because I think you're going to stress yourself out. You're going to miss opportunities. You're going to waste calories on something you can't even control. Really, the biggest thing you can control is where are you in your financial order of operations? When do you need access to cash? Build your plan around the goals around you as an individual and maximize the moment."
"Whenever I get nervous about something, there's an exercise that I like to walk through, and this is not original to me. I heard it from somebody, and I just stole it and benchmarked it. It's the seven 'so what' right? So you start asking this question: 'Okay, what do I think if the recession is going to happen?' Okay, so what? What does that mean? And then what? And then what? And by the time you get to the seventh 'so what,' if things aren't so bad that you're destitute and living on the street and can't eat and that sort of stuff, then odds are it's going to be okay. So what's the worst-case scenario if we were going to head into a recession and you invested dollars today? We've done plenty of shows on 'What if my timing is just so bad that all I ever do is I put my money to work at the absolute market tops?' Well, if you did that for the last 5, 10, 15, 20, 25 years, you have still likely become famously wealthy because over time, the market has tended to go up, and the timing did not matter near as much as the time in."
"So, Robinette, just you showing up and putting your money to work is awesome. And if you have a long time period until you get to retirement, until you get to financial independence, you shouldn't really care if there's a recession coming. Save. You should actually be excited. You should be a financial mutant that says, 'Holy cow, I'm not saying you should pull for a recession, don't pull this out and quote me on that, but you should be thinking, man, if the market goes down and I see some opportunities, I'm going to figure out the ways I can squeeze. I'm going to get a few more dollars. I'm going to max out my Roth IRA. I'm going to go max out my employer-sponsored plan because those dollars that you can save in the down years, those dollars that you can save through the volatility, are often some of the most valuable dollars you will save in your entire army of dollar bills. If you don't believe me, go look at contributions that were happening in the fourth quarter of 2018. Go look at contributions that happened during COVID-19. Go look at contributions that happened in 2022. And when you see what they've done now, you're going to be like, 'Holy cow, there's something to this investing thing.'"
"I'll give you some actual stats. I was doing some charitable giving out of my joint account last night, and Bo, I was like because when I first looked at the account, I was like, 'Okay, I'm going to give this account. I'm going to give this fund because there I have one of the technology funds, Index Fund. It was one of the QEs. I don't mind sharing that. And I couldn't give it away because I had held it for 12 months, and it was up over 40%. Amazing. That means I held this since September of 2022, and it hasn't been 12 months, so I can't give it away. But it is up over 40%. That talks exactly to the point, and that's what I'm saying, guys, don't be a market timer. Just get your time in because over the long term, it turns all that volatility into something amazing. We've even done illustrations where if you tried to scatterplot the volatility of each year of an investor, it looks like you're literally throwing darts. But if you go on a 10-year, 15-year, and actually look at performance, when you get to a long-term spectrum, it starts turning into a wave, a pattern that is a very tight pattern. It's not like it's even volatile like an EKG. It's a very tight pattern that goes around historic norms. Guys, just be careful with the timing. Don't let the news media scare you. Don't let your peers scare you. Let your goals, let your plan, let the financial order of operation system be the guiding beacon that gets you to your goals and the best version of your financial self because there is a better way to do money." For more information, check out our
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