With more education, there's less fear.

• A lot of times when it comes to finances is we don't even know what we don't know. (03:19)
• When stocks sell down, though you have that other area of your portfolio, right? Bonds, fixed income, they are more conservative, they will help us balance out those losses. (05:28)
• In the 2008 financial crisis and the 2020 pandemic, bonds did hold up considerably better than stocks. However, this time around, the reason for the losses were rising interest rates. (05:49)

Quote for the episode: Maybe now instead of saying "why is this happening to my portfolio", you can say, "I kind of get why this is now happening to my portfolio. (07:21)

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Welcome to the Enjoy More 30s Family Finance

podcast. The only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out, and distract our focus

from simply enjoying life.

Hello and welcome to the next series here on the

Enjoy More 30s Family Finance podcast, REMIX for Rising Rates.

In 2022, there have been really significant declines across

pretty much every major asset class through the end of

October. With rates rising, interest rates rising

significantly for the first time in really a long time, it can be

a very unnerving experience for people that are dealing with it,

which is pretty much everyone out there. This series is going

to attempt though to help you with that. Going back and

re-mixing a number of past episodes that I've presented to

help you emotionally navigate these more turbulent times. Each

week, I'll be re-mixing a different episode, bringing what

I would say is probably a timeless concept into the focus

of the present day situation. So as always, before I begin,

please share and like, please leave reviews. I'd love to reach

and help as many young families out there just like you.

Today's first episode is re-mixing all the way back to

the very beginning. Season one, episode one, Unknowns are Scary.

When my son Noah, if you remember was just a couple of

days old, we brought him home from the hospital. And we

started to notice these little blistery bump type things around

his diaper line. And you know, at first we just thought it was

an irritation from the diaper. Babies have super, super

sensitive skin. They're red and blotchy all of her when they're

born. But after 2, 3, 4 started to pop up, we kind of started to

realize that this is maybe something more than just diaper

rash. We came to this realization during the night so

we left a message for the pediatrician, because we wanted

to go in and see them the next day. That night, though I could

not sleep at all. I was tossing and turning, my mind just

wouldn't shut off. It was wondering just what was wrong

with him. You know, you go on the phone, you start looking up

everything on the internet, and there's just a whole box of

scary that pours out at you. And so it was a very, very difficult

night. Now the next day, we get the appointment with the

pediatrician. They have us come in and they diagnosed it as

something called impetigo, which is a bacterial infection. And

it's not a good infection to have by any means. But if you

know you catch it early, you get a prescription Neosporin kind of

a thing. And now you handle it. And this poor little boy who's

just been born is great throughout the whole process, we

have him laying on our laps, no shirt on, rubbing the ointment

on him holding up his hand, so he can't touch it. And he's just

sleeping there with his arms straight up in the air. So he

was fantastic. But you know, once that night happened, I

wasn't scared anymore. Not because the difficulty was over.

It was it was still difficult, we still had to go through and

get him back to better. However, I knew what I was dealing with,

right? I knew the name of it and I knew the treatment that was

required to have him be better. The same thing is true when it

comes to personal finance.

What you need to know is that the unknowns from a finance

standpoint or a personal finance standpoint, they work in a lot

of the same ways. So if you don't know where you are, and

you don't know what you need to do to fix it, that's pretty

scary, right? And that's true for anything across the board.

And what makes it even worse. A lot of times when it comes to

finances is we don't even know what we don't know. So Noah had

a rash. It was a visual element. I could see that there was a

problem. Finances don't always work that way. And if they do

work that way, it's sometimes because it's got so late in

dealing with the issue that now we're trying to play catch up.

So when we see our accounts in the context of this year, you

might have your accounts dropping 20, 25% or more,

perhaps, depending on how you're allocated. It can be really

scary. Like, why is this happening? I've heard words

thrown around, like interest rates and inflation but that

doesn't all of a sudden magically tells me what's going

on and makes sense. Like, oh, okay, interest rates right now I

get it now. I'm fine with my account dropping so

significantly. So why don't we start off today with an

explanation on how interest rates and inflation could

possibly tie to what you may have seen in your investments?

When inflation is too high, the government starts to get worried

about that, you know, the economy could get a little out

of control. They want it to grow, for sure but they want it

to grow it more of a controled, let's say steady rate. They

don't want the train, so to speak, to speed up too much and

get going off the tracks. So what do they do when they say

hey, inflation is too high, the economy's running too fast. What

do we do? They raise interest rates. Why? Because it makes it

more expensive for companies and individuals to borrow money. If

it's more expensive to borrow money, they won't have as much

money to spend. Think like if you go to the store and they

offer you a credit card. If they give you 0% financing versus 10%

financing, you're probably going to spend more if they offer you

the 0% right? So less spending overall slows down the economy.

So when interest rates go up, it's generally viewed as bad for

the economy. I mean, they are doing it to slow down the

economy, right? So that would make sense. The stock market

then sees this information and says, hey, it's probably going

to be harder for companies to borrow money to grow their

businesses with these higher rates. That probably means

profits won't be as high as we expected. And stocks may sell

down like they have this year. When stocks sell down, though

you have that other area of your portfolio, right? Bonds, fixed

income, they are more conservative, they will help us

balance out those losses. And that usually tends to be true;

the bond part of your portfolio if you have one is not there to

increase your returns. It's there to provide stability in

the years where the stock market decreases.

In the 2008 financial crisis and the 2020 pandemic, bonds did

hold up considerably better than stocks. However, this time

around, the reason for the losses were rising interest

rates. They weren't a global pandemic, they weren't a

financial crisis. This year, it was inflation and those rising

interest rates. When rates go up, bonds go down. So if you

think about it, they have this reverse relationship. If you

personally owned a bond that had a 4% interest rate, and now

interest rates go up and new bonds are offering 5%, Which one

would you prefer; your 4% bond or the higher 5% bond? The 5%

one, right? So when the rates go up, the 4% bond is now worth

less. In 2022, then thus far, both the stock and the bond

portions of most portfolios have been in decline, as there has

been that lack of balance.

So hopefully, you know, that helps a little bit in connecting

the dots together for you, at least at a starting point in the

series. Maybe at least makes you know a little bit more sense why

when you hear inflation and interest rates, how those

connect together, and how that may be connected to your

portfolio, depending on how you have it put together. Does that

make you feel better about seeing your accounts go down

now? Nope, you know probably not. Just like me finding out

that the name of Noah's infection was impetigo didn't

instantly make me feel better. But at the same time, it was a

little less scary for me now than when it was completely

unknown to me. Maybe now instead of saying "why is this happening

to my portfolio", you can say, "I kind of get why this is now

happening to my portfolio."

And next week's remix, Stocks Lead, Don't Follow, we are going

to dive a little bit deeper into our perspective now and how to

deal with it. While I can really only give specific advice for

people to take with clients that I know as you know, I can't give

advice to somebody's situation I don't specifically know any more

than a doctor can prescribe a drug to a patient they've never

met. What I can try to help with is the perspective element in

the way that you're looking at this, across the broad spectrum

of achieving your goals, right? Investments are there to help us

achieve our goals, not just to have a big number on a piece of

paper. So we want to remember that money is just that tool,

these coins, these papers, these numbers that we see on our

screen. Feeling that security, feeling that we're on the way to

achieving our goals and happy experiences we want to have with

our families. That is the real end game in all this and so

that's where I'm going to try to help you.

As always, please remember to review and share for others and

if you need any help, don't hesitate in reaching out. I

probably have helped someone just like you. Until next week.

Thanks for joining me today and I look forward to connecting

with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal, tax, or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer, or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS Securities, Inc., and TFS Advisory Services an SEC

Registered Investment Advisor, Member FINRA/SIPC.