Learn what tends to actually drive volatility in the market, and why many investors miss out because of it.

• The stock market is a leading indicator (02:03)
• Don't react off of past information (03:19)

Quote for the episode: "So what you can do is really the hardest thing- it's very easy to say, but it's really hard to implement. And that is not touch it."

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC.  TFS Securities, Inc. 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.

Welcome to the Enjoy More 30s: Family Finance

podcast. Today we have the fifth episode in our "Your Money

Multiplier" series, which is entitled "Stocks Lead, Don't

Follow". And this is one that is definitely keen to anxiety that

may come out from when you see the stock market, you know, go

down, you see your accounts go down and that natural fear that

kind of comes out of that. So today, we're going to cover what

you need to know when it comes to what typically makes the

stock market react. And then more importantly, the mistakes

that most investors make off of that. And so where that will

lead you to then is what you can do, so don't do those things, so

what you can do to avoid being one of those investors.

When I was a kid, I remember looking up a lot to my older

cousins. My mom's side of the family was very large, and they

would teach us a lot of you know, interesting things let's

say. Some of these were really great, and others maybe not so

much. So for example, if you break the glass in your mom's

fancy shelf clock, just take the glass out and throw it away. Now

it just looks like the glass is really, really clean. And you

don't get in trouble. I think it took my mom 10 or 15 years to

figure out that that glass had been broken. So that was, you

know, excellent advice. Saran wrap on the toilet as a prank,

that was a horrible mistake. So well, well deserved punishment

off of that one following my cousin's advice. So thank you

very much for that.

What you need to know when it comes to stocks is that they can

kind of be much the same way, especially during emotional

times. There are a lot of saran wrap ideas out there, that can

get you into a lot of trouble. The stock market is what they

call a leading indicator. Basically, what that means is

that it acts in advance of what people think is going to happen.

So if Apple earned say $100 billion in revenue, instead of

the expected $110 billion, the stock price subsequently goes

down. The company still made money, but the stock price was

already higher, as it was predicting or expecting that

$110 billion number, not the $100 billion number. As you

could probably guess then, when they feel like they had no idea

of what's going to happen next, extreme uncertainty, the market

tends to drop dramatically.

The most recent two events that we have that you might remember,

one is the 2008 mortgage crisis, and in 2020 here, we had COVID.

There was very little clarity at the time when these things were

going on of what was going to happen next. And that

uncertainty is what drove all that volatility. Once more

clarity returned, who was getting bailed out, vaccine

timelines, what you have, you know, for each situation, what

the clarifying item is, that's when it started to reverse

course.

So what you can do is really the hardest thing, it's very easy to

say, but it's really hard to implement. And that is not touch

it. You are reacting off of past information. "Hey, everything

just went down", or, "Hey, it all just went up." If you react

after hearing this, then you most times are trying to catch

the wave that's already past you on the way towards the shore. If

you're maintaining a well diversified account, and you can

listen to episode six from the first season, "Investment Should

Be Boring", if you need that refresher, then you are

positioned where you should be long term. If you have an

advisor using a diversified managed account model like we do

for our clients, they're likely rebalancing as well through

these times to potentially take advantage of the ups and downs

along the way. What's rebalancing? Rebalancing is

basically taking a little bit out of the pieces that have done

really well and putting them into the things that are a

little bit below where they're supposed to be. So again, it's

kind of a, you know, take some from the high or, you know,

selling something that's high and buying into something that

might be a little bit low right now. So if we accept that things

are going to move ahead of time, that leading indicator, before

we'll have a chance to generally react, then we can potentially

avoid some of these big mistakes that most investors make by

pulling out when things are already low, and generally not

adding money back in until things have significantly

rebounded. If you're waiting for, "Oh, I'll put my money back

in after I already see it going up", you're already missing the

up. So leaving them alone is usually the best advice that you

can give somebody in these situations, and too many people

end up with much less than they ought to have, if they had just

not touched it throughout the ride.

So a recap for today. First, understand that the stock market

is a leading indicator. And that uncertainty is what often drives

the vast majority of the volatile times. Less uncertainty

usually means less volatility. Secondly, once you see the

market went down, or you see it already went up, you are

generally already too late to act. When there are a lot of

waves, don't try jumping on a different boat basically. If you

touch your investments and miss time when you take money out or

go back in, you could very well wind up with significantly less

than if you were just patient and did not touch it at all. If

you never pull your money, you know, out during these volatile

times, then you can't miss the up, you know, whenever it may

come back. So this is one of the things that seems very basic,

seems very easy, but it's in the moment, again, you're going to

be very emotional- expect that to happen. COVID won't be the

last one, the mortgage crisis wasn't the last one, there will

be more emotional times that you're going to have to deal

with this ride. And the worst thing that can happen is if you

get, you know, really emotionally damaged, so to

speak, you know, people that lose a lot in these times, they

may be afraid to ever do, you know, invest again. And now

we're not going to be able to reach all those goals that we

want to set almost certainly long term.

As always, thanks for tuning in today. I hope that you can take

some of this information that we're providing and be able to

use this and implement it on your own. If you're not wanting

to implement these things on your own, please please please

reach out to somebody that can help. Check out our website at

enjoy more 30s .com, that's enjoy more three zero s .com. We

have an 'ask Joe' section and we'll have more resources to

come as well. So reach out and we'd be happy to help any way

that we can. If you enjoyed this episode, as we always say,

please make sure to follow us and review us on Apple podcasts

or wherever you listen. There are literally millions of young

American families out there I'm trying to reach and help just

like you. The next episode is titled, "The 7 Year Task: Legal

Docs" where we will cover one of the most important things you

can possibly do for your family's protection. And yet, it

is often one of the things that we see most young families

ignore for the longest period of time. Thanks very much as

always, 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, Joseph 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.