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Strategies for Dealing with Difficult Stock Markets
Episode 8728th April 2022 • The Wealth and Wellness Podcast with Kalee Boisvert • Kalee Boisvert
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Difficult markets are uncomfortable and just really not fun to have to go through. But a natural part of market moves is that they also move down too unfortunately. In this episode I share strategies for dealing with difficult markets. Keeping the focus on what you can control and reflecting on money victories anytime you feel the negative outweighing the positive can also help you get through these difficult times.

About the Host:

I am a financial professional, who specializes in helping people to achieve their financial goals.  My absolute passion is creating new possibilities in people’s lives by showing them the ropes when it comes to money. I’m here to spark healthy and positive conversations around wealth and investment and create a world where nobody is limited by their financial situation. I believe this begins with education and shifting our relationships with money. I love getting to witness people achieving their most ambitious goals and creating new possibilities for themselves and their families! 

 

I love your questions! Reach out to me anytime at:  

Email: kalee.boisvert@raymondjames.ca

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https://www.facebook.com/kaleeboisvertwealthandwellness/

  

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Transcripts

Kalee Boisvert:

Welcome to the wealth and wellness podcast with

Kalee Boisvert:

me Kayleigh, Bob air. I specialize in helping people to

Kalee Boisvert:

achieve their financial goals. I have a love for all things

Kalee Boisvert:

numbers, and I'm passionate about financial literacy. My

Kalee Boisvert:

goal is to spark healthy and positive conversations around

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wealth and investment, and create a world where nobody is

Kalee Boisvert:

limited by their financial situation. But wealth is just

Kalee Boisvert:

one piece of the equation of living our best lives. So join

Kalee Boisvert:

me as we explore both wealth and wellness topics. From your net

Kalee Boisvert:

worth, to your self worth, get ready to take confident action.

Kalee Boisvert:

Hello, this is Kaylee. And thank you for taking the time to

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listen to this episode of the wealth and wellness Podcast.

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Today I wanted to focus on a wealth topic. markets have been,

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I guess, or have had a rocky start to the year so far 2022 So

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far, and there's a lot of factors contributing to the

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volatility we're seeing, which includes interest rate

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increases, inflation concerns ongoing and of course, that the

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war that is ongoing as well. So I think first, first of all, you

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know, it's important to take some time to remember and

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acknowledge that, unfortunately, these big factors are really out

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of our control. And when things are not going well, generally,

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our first reaction is, you know, in life, if something's not

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working, it's not going well, well, we want to do something we

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want to fix it. But again, these are much bigger issues that

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unfortunately, they're not, they don't have an easy fix. So we do

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have to give them some time to actually play out. But in the

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meantime, I wanted to take this time in this episode to focus on

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what you can do for your money and investments by talking about

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strategies for dealing with difficult markets. So if that's

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the state we're in right now, which you know, it's it appears

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that we have been in for since the start of the year, well,

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let's then talk about what to do strategies for dealing with

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difficult markets. So first off, I would suggest that reminder,

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to have a long term approach when it comes to investing. Any

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sharp like decline in the stock market is often accompanied, of

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course, by a lot of negative headlines in the media. So we

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are hearing words like crisis, meltdown, like there's very

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dramatic negative information that is being given to us. But

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the fact is, volatility is a normal part of investing,

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unfortunately. And so we do have to remember that dips in the

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market happen. And they've happened before and they will

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happen again. Specifically, you're like as an example,

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there's been 10 declines exceeding 20%, in the Canadian

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markets since 1977. So that just proves to you that this has

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happened before. This is something that occurs, this

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volatility, these dips in the market. And in fact, there's

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been 10 declines, exceeding 20%. So some big dips, there's been

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10 of them over 20% since 1977. But over the long run, what's

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important for us to remember is that market declines have always

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been followed by even greater recoveries. So in each past

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decline, the stock market eventually retraced their

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losses. And it went on to post new highs. So in the short term,

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the stock markets move in cycles, and they go up and down.

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But in the long term, if we can kind of step back and take that

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long term view of the stock markets, the trend is up. So the

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s&p TSX Composite Index has posted some very respectable

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average returns over 45 years. So if you take the 45 years

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period ending December 31 2021, the average annual return for

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the s&p TSX composite index was 10.2%. Over that time, but to

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reach that return, investors had to go through that up and down

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that, you know, the peaks the valleys as well. So it wasn't

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all just a straight trajectory of that 10% per year, not at all

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there were higher years, there were lower years and things in

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between. So one strategy for dealing with market volatility.

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And remembering this long term focus is to try to put the Daily

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News into a long term perspective. So again, we're

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bombarded by Daily News. In our lives of in all respects of

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life, but if we can kind of take that longer term perspective,

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when it comes to investing and money, despite all the negative

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news, we know that recessions do and businesses continue to

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operate, and economies and markets do recover. And then

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they do grow as well, when we have looked long term. Okay, so

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that's the reminder of, let's look long term when we look at

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investing. Second. So when dealing with difficult markets,

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it's really important to remember that when you're

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investing, you do need to be diversified and market, the

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moments when markets are sort of, you know, coming down or

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having some of these volatile type days that we're seeing,

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that's when we're really reminded of the importance of

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diversification, I think, because if you're not

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diversified, you're gonna really see your portfolio reacting a

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lot more to the volatility than you would if things are more

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diversified, more spread out. So diversification is a key

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principle in investing. And it's just that reminder of work can't

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put all our eggs in one basket. And this helps in, in a sense,

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diversification, it should theoretically help reduce your

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overall risk and volatility. So how can you diversify? What does

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that mean? Well, you can diversify through the type of

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asset class you're investing in. So investing in stocks, and also

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investing in bonds, and having cash and cash equivalents in

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your portfolio. So, again, that's a reminder, some people

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wonder, you know, you're not supposed to have or think you're

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maybe not supposed to have cash? Or why would there be a cash and

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investment portfolio, but remember, cash is a tool as

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well, and it can be put to use for opportunities in the market,

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when things are going down. When there's a specific stock, maybe

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that looks like a good price.

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So cash is an investment and cash equivalents, you know,

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using things like guaranteed investment certificates of GICs,

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the very low risk cash, like investment, for instance, where

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you're gonna get a bit of a return on your cash, and, you

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know, maybe a little bit more so now, because rates are rising,

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diversification through country. So instead of being invested in

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just the country you live in, whether it be you know, if

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you're in Canada, or the US, making sure that your portfolio

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is diversified internationally. So maybe if you're in Canada,

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you have some Canadian exposure, some US exposure, and some

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international exposure being diversified through the sector's

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so having things like okay, maybe you have some healthcare

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sector stocks, you have some technology related stocks, and

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then you have some, you know, consumer staples, for instance,

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or utilities, because when markets are not doing so, well,

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well, where are the where are the maybe potential companies

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that are still doing okay, or performing? If we think of, you

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know, recessionary periods, or when people are cutting back on

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spending, well, what are the things they're not cutting back

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on, and if we can kind of have that in focus, maybe those are

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those consumer staples, the things that people are just

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gonna keep buying, no matter what, because, you know, that's

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the last to cut back on, maybe they're first going to cut back

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on the luxuries and the travel and things like that, but

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they're the last things to cut back on, they're maybe not going

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to really change a lot to do with their, you know, like

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standard groceries or, or their utilities like their electricity

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and things like that the US. So that's that reminder of sectors

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and being diversified across the sector's because some do perform

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better than others. And with what we're going through right

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now, in the market, for instance, you know, the energy

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sector is performing well, based on obviously, the conditions of

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the world and the world events, but it's really hard to tell,

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before something happens, what that sector is going to be. So

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that's the idea of why we're diversified to begin with. So

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when something does happen, you have a little bit of variety,

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and you're you're spread out over different sectors. And, you

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know, if you're investing in more diversified products in

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general, like we're talking ETFs, so exchange traded funds,

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mutual funds, those in themselves are going to be quite

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diversified for the most part. Of course, if you're having one

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that's a specific theme, not so much, maybe, but if you have

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those types of investments in your portfolio, a lot of

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diversification is probably already being achieved through

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using these types of products because ETFs exchange traded

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funds, mutual funds their baskets of different holdings.

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Another way to diversify is the number of holdings so if you are

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investing in just individual stocks in your portfolio,

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there's a big difference for if you have for instance, Just to

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stocks or for stocks in your portfolio versus 25, or 30

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stocks or 50 stocks, if you only have a couple, a big event or

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big company specific event could massively impact your portfolio.

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You know, bad news for a specific company can bring down

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the stock price of that company. And if that was one of two

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holdings, or three holdings in your portfolio, you're going to

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really see the impact of your portfolio on your portfolio from

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something like that. And then, of course, we can also invest in

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different sizes of companies. So when we think about investing,

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oftentimes you hear about investing in, you know, large

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companies, blue chip companies, they call it as well. And that's

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great, because they're very probably, well established

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companies, they have a proven track record of revenue and

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things like that, versus smaller companies. Because when markets

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are more volatile, it's probably the smaller companies that

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you're going to see. move more to the negative, and again, just

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with fear of okay, is this event going to actually impact their

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ability to sustain profits and revenue and stay in business for

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a small company versus a larger company, they can probably kind

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of, you know, handle some of the, the highs and some of the

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lows too, and sort of wait it out. So that's why we're

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diversifying. Those are some of the ways or the the sort of

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factors or elements you can look at for diversification. And, you

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know, why is diversification so important? Well, again, each

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asset, each holding each product, whether it's, like I

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said, ETFs, mutual funds, stocks, bonds, cash, they all

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perform differently, as economic conditions change. And there's

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no way to predict which one will be the leader, obviously, before

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an event has happened. So we kind of only see what's, what

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happens and what plays out when the event occurs. So I have

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this, when I'm doing like my, some of my presentations and

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things like that about investing in person or over zoom, when I

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have them. There's this colorful chart that they have that shows

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returns in the ranking of different asset classes each

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year throughout kind of the last 10 plus years. And although this

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is a podcast, and I maybe can't show you the visual visual, I

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can at least share with you that what this chart really shows is

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that each asset class has vary dramatically over the past, you

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know, 1020 years. So what was the best performing thing or

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element, maybe it was Canadian bonds were the best performing

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one year? Well, that wasn't necessarily the next the case

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for the following. You know, maybe the year after that, it

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was US equities. And then it was Canadian equities. And I'm just

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throwing out random ideas for you here. I'm not specifically

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stating you know which year in which one was but just to give

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you that idea of what's on top one year doesn't necessarily

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mean it's going to continue keep being that top performer

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consistently, year over year. And what we've seen, it's, it's,

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that's not the case. So having that diversification, having a

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little bit of variety that we can have, you know, a few of

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these different products that we're able to, you know, weather

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out some of these ups and downs, have some of the better

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performing stocks, for instance, when markets are going down. And

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of course, when markets are going down in general, it

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doesn't mean that, you know, diversification is gonna save

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you entirely from that, right. Oftentimes, when we're just

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going through big events, big economic condition changes, big

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geo geopolitical events in the world, we're often going to just

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see an overall decrease across the board. But within that maybe

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there are certain sectors or products that aren't going down

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as much, which is, you know, nice to see and kind of have a

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little bit of a reprieve on your portfolio that it doesn't go as

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down down as much because of that diversification. So again,

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unfortunately, diversification is not going to protect you

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entirely from some of the movements in the market, but it

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is one way to assist. So thirdly, I want to talk about

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four strategies for dealing with difficult markets are really

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important. One is resisting the urge to try to time the market.

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This one's so important. So the ideal strategy, of course, if

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you think about just investing, you know, what would you want to

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do? Well, you'd want to sell right before the market goes

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down, and you'd want to buy right at the bottom when it

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begins to move up. That's the ideal scenario, right? You want

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to find the very top of the market before it moves down

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because that's the point where you want to sell your

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investments. And then you also want to find the very bottom

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when it's bottomed out completely and it's back on its

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way up and that's when you want to be buying it And that's

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great. And, you know, if that was possible, and we were all

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able to do that, I think we'd all be probably

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multimillionaires, you wouldn't be listening to this right now.

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But it's just that reminder that it's, you know, the execution of

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that is nearly impossible. I don't even think, you know, the

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greatest investors of all time would claim that they can do

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that kind of a move with, with that percision. What generally

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ends up happening is when people try to time the market, is they

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end up selling close to the bottom, so not at the top, but

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closer to where it's bottoming out. And then that, you know,

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getting back into the market and having the courage to go back

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into the market takes some time, to a point where the markets

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already recovered some. And so it's leaving them, you know,

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potentially in a worse position, because if they sell at the

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bottom, and they buy on the way up, you know, they're worse off

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than if they would have just stayed the course. So

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historically, there has been no indicators that have

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consistently predicted the direction of the market, you

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know, with that 100% accuracy. So even the economy is not a

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reliable predictor of the stock market, unfortunately, which

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sounds odd. But it is that the market often rebounds months

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before a recovery is evidence. So the markets often steps

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ahead, and it starts moving before we've even seen, you

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know, the positive changes and catalysts widespread in the

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market. So when the market does recover, the gains can happen

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quickly. And again, if it's too quickly to try to get back in

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when we're timing. So you jumped out and now okay, when's the

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right time to get back in if you miss some of the best days of

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strong returns, it can have a huge impact on your portfolio.

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So as an example, for an investor who stayed invested in

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the Canadian stock market, over 30 years ending, December

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31 2021, so as of last year, they stayed invested the 30

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previous years, they would have averaged an annual return rate

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of just over 8%. But missing the 10 best days would have reduced

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that return to 5.7%. And missing the 25 best days would have

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given them a return of 3.6% per year. So that's a huge

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difference, we're just missing the 10 best days, over 30 years.

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And again, you likely are going to miss a couple of the best

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days, if you're jumping in and out. That can bring it down by

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you know, two plus percent and then missing the 25 best days

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can bring it down by about 5%, which compounding over a yearly

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basis has huge implications on the resulting, you know, balance

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in your portfolio. So just again, missing a few of these

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big return days can have a major impact. And in that case, it

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means that people would have been better off to stay the

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course over that time period. So again, it's really weird and

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almost counterintuitive, I find to like comprehend that, because

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again, markets are going down, we want to do something, the

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obvious first reaction is probably okay, you know, get out

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run for the hills, wait till things calm down, then get back

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in. That's great in theory, and if you could execute that, that

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would be fabulous. But the challenge is executing it, and

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doing it perfectly on both sides, selling at the right

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point and buying at the right point. And again, it's very,

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very hard to achieve. Okay, so that's all about timing the

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markets. So you accepting that we're not, as you know, s Martin

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and we don't have that crystal ball, unfortunately, to be able

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to time it with that precision.

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Another point about what to do in difficult markets is just

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investing on an ongoing basis if you can, so that's including

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when the markets are down. And again, that might feel

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uncomfortable and sound uncomfortable, but a great

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Warren Buffett quote for difficult times in the markets

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which I like is be fearful when others are greedy and greedy

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when others are fearful. So in those times where people are

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fearful when they're saying all is, you know, all hope is lost

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and markets are done and they're not coming back up. And if

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you're if that's kind of what's going on, we'll that's maybe the

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time that he's suggesting that you get greedy that you look to

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go buy in the markets, that that's an opportunity. So it's a

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reminder to us that investing when things are going down is a

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great strategy and can work in your favor in the long term

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right. If you can buy on those dips, it's always just going to

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add for you what you have position wise in the long run

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when things do go back up, which, which I've said, you

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know, near the beginning of this podcast is what has historically

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happened in the markets that they have come back up. So when

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markets are down, though, it's usually the last thing that

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people want to do is invest. But think back just even a few years

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ago to the global pandemic, when it first started, the markets

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went down, and they went down fast. And if you had added money

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when they were declining, and during that time, or it was,

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again, that feeling of well, this is, you know, terrible, the

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world is shutting down, everything stopping and it is

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that's very uncomfortable to think, Well, yeah. Now, yeah,

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here's the opportunity, that's probably wasn't what was going

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through your mind. But in fact, it really was because the

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markets did go on to rebound. And, and have, you know, come up

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since that that dip during COVID. So it was an opportunity

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to invest. However, most people, again, the the emotional

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response, was run away from the markets and just come back, you

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know, later when things look better. But that's maybe exactly

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actually exactly the opposite of what you could or should be

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doing. For the opportunity of buying low. So if adding to your

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investments, when the markets are down, still sounds

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difficult, again, uncomfortable to execute, I completely get

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that. Because again, I see it all the time with with actual

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people and not wanting to do it. So I know that that is the case.

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It's one thing to say in theory, like yes, it's great by when

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things are down. But the how many people actually action on

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it? Very few. So if that's a difficult strategy, then I would

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say just having a strategy where you're adding to your

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investments on a regular reoccurring basis, is a great

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way to kind of get around that emotional tug of like, oh, I

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don't really know if I should, or this feels uncomfortable. And

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then having your ongoing amounts just added, maybe it's each pay

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period, maybe get paid on the first and the 15th of the month,

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and you put away $500 each pay period, or $200 each pay period,

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and it goes into your investments. And it's added to

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the markets. And so the markets are going up, the markets are

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going down, they're going sideways, whatever it is, you're

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just saying, I'm just continuing to add on a regular basis, I'm

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gonna catch some of those down days, maybe I'll even catch the

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exact bottom by chance by just putting it on those specific

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days. And I'm just going to keep averaging in so it's called

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average cost basis when you're doing this kind of strategy. And

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you're averaging in at different prices, but it's giving you that

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access to the ups and downs. Because again, we go back to the

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point, it's very difficult to time the markets. So if you can

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invest on an ongoing basis, or invest in those times where it

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feels uncomfortable. And again, just having to do it

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automatically for you to kind of take out that, that emotional

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pole if you're feeling uncomfortable. Okay. And lastly,

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difficult markets, I just want to remind you to keep the focus

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on you, and your goals. So in difficult times, there's so much

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information and so much opinions circling and it gets

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overwhelming and you start questioning everything, you

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know, and it's stressful, you start questioning, what am I

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doing? Is it you know, is everything I'm doing wrong?

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Should I be doing something else? Is this the right

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strategy? Well, again, you have to remember you have no control

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over the external forces. So those are going to happen, and

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they're always going to happen, they're always going to be here,

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you know, where we're at next year and what those are and

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what's going on in the world. You know, we probably don't know

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at this point in time, but there's probably going to be

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something that's that's making news headlines and whatnot. So

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instead of getting swept up in that fear and anxiety, there's

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more positive ways to expend your energy and staying focused

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on you and your personal goals is one way to kind of keep in

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that that energy of positivity and and opportunity in where

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you're going and have that be the focus. So what is it that

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you're aiming to achieve with your finances? What

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are your short term goals, medium term goals, long term

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goals, take some time and just think about those again, plan

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those out, write them down if you haven't, or go back to them

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and write them down again as that reminder, because it feels

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really good to think about, you know, the dreams and the desires

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and where you're going. It gets you feeling back into the

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driver's seat of, of you know, what you want to achieve where

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you want to go versus feeling very out of control, and very

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anxious and scared of what's going to happen. Just doing

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something like that just brings us back and centers us to

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remember okay, this is what I want. This is where I'm going

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and that's that's the focus And and focus on your financial

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victories to keep that positive vibe too. So let's say you

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wanted, you had a goal to pay down your debt in 2022. And

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you're well on your way to paying off your credit card, you

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know, celebrate that show, you're like, show yourself,

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okay, this is where it was before, this is where I am. Now,

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that's amazing. And give yourself that reminder. And

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that, you know, pat on the back, or the high five is a great

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thing to do. Because it gets you into that, that positive that I

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can do it mentality versus, you know, all hope is lost, which

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it's easy to get pulled into that mentality when that's what

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we're hearing and seeing around us. So yeah, maybe your goal is

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you wanted to save more. So you started ongoing deposits of a

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couple $100 into your tax free account, and you just started

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that this year. Again, give yourself a pat on the back. Give

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yourself that victory. You know, spend time in that don't

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discount or forget to celebrate the successes to that show how

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far you've come, because those are worthy of your time and

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attention. And it will keep that focus positive and optimistic.

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And again, on the things that you can control, which is where

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it's better to be expending our energy on what we can do on what

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we have done. Those small victories to they add up to much

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bigger overall contributions to building your wealth. So they

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might not seem like much. But in the world of investing and

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growing your money, you know, we always talked about compounding

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and how every little bit helps. And so these are big things that

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are really going to make a big impact. So congratulations for

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doing them and make sure you're giving yourself the much needed

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congratulations for doing those. So that wraps up my podcast for

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today. Again, difficult markets are they're uncomfortable, and

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they're just overall not a fun experience to be going through.

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But a natural part of markets is that they move and part of that

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is that they will also move down, unfortunately. So try to

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keep the focus on the things you can control the things you can

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do, and reflect on those victories anytime you feel the

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negative outweighing the positive. Because that's kind of

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at least going to help you keep your headspace in in the

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positivity and the possibility and where you're going. So thank

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you so much for listening in to this episode, and I will catch

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you on next week's episode. Good bye for now.

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I hope you found value in this episode. And because I'm such a

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proponent of taking confident action, I want to pose a

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question to you the listener. What is one action that you feel

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inspired to take after listening to today's episode? If you enjoy

Kalee Boisvert:

listening, please subscribe and share with your friends and

Kalee Boisvert:

family. Thank you so much and I will catch you next time

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