GrowthCast Episode 04: Importance of Maintaining a Long-Term Perspective

Transcript

Introduction

[0:00:09.3]JL: Welcome to today's edition of DHG's GrowthCast. I'm your host, John Locke. At DHG, our strength lies in our technical knowledge, our industry intelligence and our future focus. We understand business needs and are laser-focused on company goals.

In this every-changing world, DHG's GrowthCast provides insights and thought-provoking conversations on topics and trends that address growth opportunities and challenges in the current and future marketplace.

Thanks for joining us as we discuss tomorrow's needs today.

[0:00:42.3]ANNOUNCER: Views and concepts expressed by today's panelists are their own and not those of Dixon Hughes Goodman LLP. Always consult the advice of your legal and financial professional before taking any action.

Interview

[0:00:58.2]JL: Our guest today is Will Sneed. Will is President of DHG Wealth Advisors. In May of 2020, Will will mark his 35^th year in the investment industry. DHG Wealth Advisors oversees approximately 2 billion dollars in assets under advisement. The Wealth Advisor team includes 40 advisors and client specialists with designations ranging from certified financial planners to retirement plan and insurance specialist. Well, as a graduate of East Carolina University and holds the chartered retirement planning counselor designation. Thanks for joining us today, Will.

[0:01:34.8]WS: John, delighted to be here. Thank you.

[0:01:37.5]JL: Well, it's hard enough being an investor in good markets, but when markets are volatile and lately they've been extremely volatile, it's easy to focus on minimizing short-term pain and forget why you even chose to invest in the first place. Will, many investors are feeling extremely nervous about the recent market volatility. What's the most important piece of advice you're giving your clients right now?

[0:02:01.8]WS: I think when we stop and consider where we are in the history, you look at, we've had the most volatile month we're probably ever going to see in the history of the market. We're seeing an incredible health scare. We've seen up and down markets of 5% to 10% in a day. That is calls to make somebody nervous.

I think the important thing is to recognize it's okay to be a little bit nervous, but understand why the market is doing what it's doing. It's trying to price in what's going to happen with this economy. I think if we could back away from the minutiae of the news, of the minute and get out of the one or two-minute increments of thinking about my mark, my stock market, my portfolio and look through the time lens of one to two years, I think we'd be a whole lot better off. My biggest message would be step away from the TV, step away from the news and just look from a one to two-year timeframe out.

[0:03:12.3]JL: Great advice. Fundamentally, we all know that the basic rule of investing is buy low, sell high. Does that mean someone should put money to work right now in the market?

[0:03:24.5]WS: Great question, John. Volatility is a scary thing and we've got to keep in mind, nobody's going to ring a bell at the bottom of the stock market, right? We're not going to know the exact bottom of the stock market. We're down about 20% right now. I think again, if we could put ourselves in a time machine, that sounds like a silly analogy, but put ourselves in a time machine and rock it out one to two years out into the future and look back. I think we're going to say, "Wow, I'm glad I bought stocks with that level."

I'm a big believer that you do something today that your future self is going to thank you for. I think rebalancing, looking at your portfolio, adding in where it makes sense right now to your portfolio on the stock side makes a lot of sense.

[0:04:20.9]JL: Yeah, that does make a lot of sense. Well, obviously there's people out there who are the naysayers, that are really uptight and they are just coming at you and saying, "Wow, I just want to get out. Well, I'm scared. I want to get out. Let's stop the bleeding and sit on the sidelines and just wait this one out." What do you say to someone like that? I'm sure, you've probably had a few of those conversations already.

[0:04:48.8]WS: Yeah. You know, John, we're having the same conversations on both sides. We've got some clients asking, should we put money into the market or should we get out of the market? We're having both sides of the coin. It's always interesting to go from one conversation to the next, but the easiest thing in the world is to get out of the market. The hardest thing is to figure out when to get back into the market.

If you get out now, you've got to make two right decisions. If you get out now, you're already locking in the lower prices and then you're waiting for prices to drop and then when you get back in. Again, our advice to somebody would be if you are absolutely totally scared and you've got to raise some cash, look at what cash you might need over the next six to 12 months and put that on the sidelines and then leave the rest of your portfolio to work for you.

[0:05:44.6]JL: How can investors be tactical markets like the one we're currently in, Will?

[0:05:51.4]WS: There's an old adage that says, it's time in the market, not timing the market that matter. There's really no way to time the bottom of the market or the top of the market. To come in here and try to time this market is going to be really, really hard trying to be tactical and pick the stocks that are following the most. It's going to be really, really hard.

The best thing you could possibly be doing right now is again, go back to your original plan and decide what stock allocations did I need that get me to my goals? What kind of allocation is going to meet my plan? Then you rebalance to that position. If you came into this market correction with a 60/40 allocation, stocks have pulled back, your allocation is probably now 50/50. Well, now's the time to be looking to take some of the stock, some of the money that's in the bond side and push it over to the stock side. Now is the time to be doing that. It's time in the market, not timing the market that matters.

[0:07:05.8]JL: Question just came to mind, Will, hearing you talk about this. The media is obviously influenced in a lot of the anxiety that the individuals, investors are having. One of the things right now you're hearing a lot of is hospitality, transportation stocks and people thinking that they really want to make a quick buck on some of those extremely volatile industries right now. What would you say to someone who has a little extra cash right now, willing to risk it and saying, "I'd like to go after some of these higher quality transportation stocks that are obviously are going to come back at some level?"

[0:07:44.5]WS: It may not be a bad idea. I was talking with Paul Harteg, our Chief Investment Officer the other day about that very question. Paul said, "Well, be careful running right into the fire. You don't want to run right into the burning building." I think that's good advice. You can always get fortunate or lucky, pick the right stock, but it's so hard to pick stocks. History is littered with people who try to pick stocks. Our approach is you build a balanced portfolio, allocate across all the different asset classes and let the capital markets work for you.

[0:08:24.0]JL: It seems like the prudent thing to do and especially when people are looking at their portfolios and getting anxious and watching the market go back and forth, can you share a little bit of additional insight about why the market is bouncing back and forth like it is right now and how do you see that stabilizing going forward?

[0:08:47.6]WS: There is a lot of volatility right now. We've seen the most volatility in the month of March than I think we've ever seen in the history of the stock market. We went back and looked at that, John. Again, we've seen days that were down 5%, 6%, 8%, 10%, 12 % in a day. That's not normal. We've seen days that bounce back 5%, 6%, 8%, 10% in a day. Again, that's not normal. Where is that coming from?

You've got algorithmic trading going on that's taking place. You've got days where you've had people just saying sell everything. Just a mindset of, "Get me out." That messed up not only the stock markets, but it also brought increased volatility to the bond markets, which was totally unprecedented.

Now we've seen the fed coming in and somebody I read about in The Wall Street Journal this weekend said, the Fed threw the kitchen sink at it and now is throwing another kitchen sink at it. It's doing everything it can to shore up the market here in the United States. I think we're starting this see European nations are going to do the same thing. All the world markets are doing the same thing with their markets and their Fed, their treasuries. Their government is coming in to try to rescue this market.

It's not just rescue the market, it's prop up the economy as best we can. That's what the market is trying to figure out is where is this thing going to end up? We're trying to price in the good news today, the bad news tomorrow. It's measuring all the news that's out there and that's the efficient market theory, is it takes all the news that's known today and if factors it into stock prices. Ultimately, will come around.

[0:10:50.2]JL: Yeah. I'm just curious, you've been in this investment business for many years. I think we were talking in the opening, 35 years and happy anniversary in May, by the way.

[0:11:01.5]WS: Well, thank you.

[0:11:02.9]JL: We all remember the recession back in 2008, 2010. Share with our listeners a little bit of perspective. What did we learn from that time period that we could also apply to some of our rational thinking and retirement plan strategies?

[0:11:22.6]WS: Thank you for bringing over the 35 years. Makes me just feel old. Sometimes, being old gives you some perspective. I can remember being an advisor. I've been an advisor for just about two and a half years in 1987. My firstborn child was six-months-old and we saw the stock market decline on the Friday in October significantly. Then it fell even more on that Black Monday and it was down 20% that Monday in one day. Take the worst day that we just had and double it. That's what we experienced in '87.

Then we saw like you said, we had the dot-com bubble in 2000-2002. We had the recession in 2007 to 2009. I think the biggest lessons we learned back then, John, is what we're telling our clients now is we've come through these things before. We've been through storms before. Yes, this one has a different feel to it because we're all quarantined. We're not sitting across the table talking to each other right now. We're doing this by wonderful technology. It's different feel, but we've always come through those declines. 1987, 1998, 2000, 2002, 2007, 2009. We always come through those declines. That's because capital markets work, now still believe capitalism will work. I think we're a resilient people and we're going to come through this thing stronger than ever.

[0:13:06.1]JL: Well said. I got to tell you, I feel better just talking to you, Will. I'm not going to go look at my account at all anymore for the next few weeks. Thank you for that level of reassurance and comfort and perspective. That's wonderful.

End of Interview

[0:13:21.4]JL: You've been listening to the DHG GrowthCast today with Will Sneed, President of DHG Wealth Advisors. We hope that you've learned a few tips on managing your investment strategy and retirement savings during the COVID-19 economy.

I'm your host, John Locke and I look forward to reconnecting with you again soon on another episode of DHG GrowthCast.

[0:13:42.2]ANNOUNCER: The content and this podcast is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. The opinions expressed in this podcast are those of the participants only and do not necessarily represent the views of DHG Wealth Advisors.