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It's Brian Preston, the money guy, restoring order to your financial chaos. Retirement, investing, taxes. You've got financial questions, he's got financial answers. It's Bryan Preston, the Money Guy. Welcome to the Money Guy Show. I'm your host, Brian Preston. By day, I am a fee only wealth manager on the south side of Atlanta. I am a certified financial planner, certified public accountant and I'm a personal financial specialist, which means I'm a CPA that does financial planning. So we're here, so we're here to talk about and it seems like this is a common trend and I hate to keep coming back to it, but I think every two or three months, especially in this type of marketplace, you guys need a reminder, something that will keep your eye on the ball, keep your eye on the prize that is out there. If you can be open minded to what is the long term purpose of your financial dreams, what you're trying to do, what you're trying to accomplish, why you're saving monthly and all this noise that goes on with the 24 hour access to financial information, whether it's the news channels, whether it's the magazines, the newspapers, it is noise in the grand scheme of where you're trying to end up. So that's what we're here to talk about today. We're talking about fear, the financial markets and your money. And I'm trying to help you not to panic because just because this might be the dreaded R word, the recession or this could be definitely we're headed toward or we are in a bear market. You don't have to lose your mind and lose all of the analytical thought process that puts you into the plan that you're currently in. You don't have to leave all that behind just because we're in some dark times here for the economy. I want to give you the contact information. If you want to go check out the show notes, you can go to moneyguy.com you can also email the show. That's Brian B R I a n@moneyguy.net and love to have your input on the show. And of course you can go check us out on itunes. What has made us so popular and put us on that featured front page of itunes is some of your great comments. And I could not have done this show without the grassroots growth that you guys have brought. So let's talk about this first. I want to go ahead and apologize. This post is exactly one day late and the reason it's late is because yesterday I spent most of the day Fielding concerned phone calls. And then I was also writing an economic and market update letter to my clients. And you can imagine that letter was generated because of some of the phone calls I received. I know that there's a lot of scared people out there, and I take that to heart. I really do. And it's during these volatile times that good advisors prove their worth to their clients. And that's what we're trying to do. And as you can imagine, it's also a stressful time for me. You can ask my wife that. I mean, I've been walking around, kind of moping around, because this is not easy. I mean, when you manage people's money and you have quite a few of your clients are in the retirement phase of their life, you're carrying the weight of their retirement on your shoulders. And that is not something that is easy to take in. But with that said, I know that there are quite a few listeners that are new investment advisors. They're students studying to become investment professionals, and there's even others out there considering making the jump. So I think this show is very beneficial because for those individuals who are thinking about getting into this field of study or just are that type of person that just talking about finances, talking about investments is very intriguing to you. This is the type of stuff that will allow you to really grow as a manager of money. Even if you're not going into the field. If you're managing your own money and you're a younger person. Bear markets don't occur. They occur usually once to twice every decade. Since they don't occur all the time, you can learn a lot during these moments. That's what I would tell you. Take in everything that's going on around you, because you can absorb a lot from this experience, and it can make you a better manager. It can make you a better person handling your own personal finances, because you get to firsthand see the importance of diversification. We talk about diversification for years, and it's only when you get into these rough patches that you really see the value of diversification. Because if you go back in time, look at some of the years out there, like in 1998, when the S&P 500 made over 28%. 2003, the S&P 500 was up. I think it was up. It was either 23 to 28% that year, because that was the year we recovered. You would have done much better just buying like an S&P 500 fund and then being diversified. And that's a lot of people they miss the point. If you're just buying all equities, you're not diversifying and following the rules that we're trying to tell you on the power of diversification. Sure, there's some great years out there that can give you a lot of banter to go to and talk about at cocktail parties about how smart you are. But what you don't have is this protection when you hit markets like exactly what we're in right now. I got to tell you, if you're one of those people sitting out there just in an all large cap stock or all international or something like that, you're starting to go, man, maybe there is something to this power of diversification, because that's going to be what helps you weather this storm. That's what's going to allow you to make sure that you're not counting on just all one group of assets. Because you know, there are things that are making money and you just have to make sure that you have yourself represented across enough asset classes. Whether it's, you know, you of course got to have your traditional equities, you got to have some bonds, you got to have some cash and equivalents, you got to have a little bit of real estate. Even though real estate's become a cuss word, real estate is not a bad thing to have in the long term. You got to have commodities, you've got to have all kind of exposure so that you can take advantage of what's going on. And of course, long short funds or hedge equities, whatever you want to call them, they have many different titles. Primarily for mutual funds. They're called long short funds because that's what Morningstar has deemed their name. But for very wealthy investors that are doing it on the private side, they're called hedge funds. So think about these things because you are getting first hand access to seeing the power of diversification, the relationship of risk and reward, because they do go hand in hand. Obviously, people who thought that they had a huge ability to absorb risk because they wanted that outsize return are quickly understanding that with that great reward that you can earn, there's also quite a bit of volatility that comes with that, meaning that it's a roller coaster. You might make 40% one year, but you might give back 25 very quickly. You've got to think about the relationship between risk and reward and of course, the importance of controlling your emotions, because I know they're raw right now. When times are good, it's easy to look at the average returns of the equity markets and jump right in. This is what I was talking about, that risk and return. You can jump right in with the anticipation of letting your money work for you. So you're not having to work with your back, you're not having to work with your hands. You've got your money working for you. What do you have to worry about? But once there's a sign of any trouble on the horizon, that decision starts to become cloudy and the desire for comfort and safety take over for a lot of us out there and. And that's what can get you in trouble. We all hear the adage that you want to buy low and sell high, but I think you're going to find out from some of the items I'm sharing today is that many of us out there do the exact opposite. A lot of us do where we're buying high and then we sell low. And there's research out there that supports this. And I'm going to go over that today. If you want to go out and check out those show notes again, that's moneyguide.com that's moneyguy.com you can go look out because I put some links and let me go over real quickly what these links are. I've got the cycle of emotional investing. I put these all in PDF version, except for the link that I have to a Barron's article. But the rest of these are PDF files that I've put out there so you can actually look at some of these things. I've got the cycle of market emotions. And I've talked about this in the past and what I think is very interesting is that we've definitely come out of. If you're going through the cycle, you first start off when a market is coming out of recovery mode, where you have optimism, where people start to realize, hey, maybe things aren't so bad. Go through excitement, then they get into the thrill because they're making money. You're not worried about things with what's going on out there in the market because everything's rosy, the economy is looking great. This is the period between thrill and the euphoria that comes from making money in the market is where people start to think they are so smart they figured out how. They wonder why everybody's not doing what they're doing. And then when you reach that point of euphoria that is really the point of maximum financial risk. It's interesting. And I'm going to talk about this in one of the articles, the Barron's article that I'm Going to talk about at the end of the show is if you go back in history and look at the biggest inflow of investments into mutual funds in history, you'd be surprised to know that I believe it was February of 2000 and what occurred in March of 2000, that's when we started the fall of 2000, 2001 and 2002, the longest running bear market since World War II. So that's a very scary thing that we had the longest bear market and yet we had the biggest inflows right at the beginning of that financial disaster, that Internet bubble that was out there. So it truly is the point of maximum financial risk. So once things start coming down, if you're going back and looking at say March of 2000, if that's the euphoria and we start coming down, we have anxiety. And then between anxiety and we're headed towards denial, right in between there you have people say, this is just a temporary setback. I'm a long term investor, I can handle this. And I'm not so sure that we've not passed the denial stage. And we're headed towards the fear because this has been going on for four straight months now. We're starting to get people that are starting to get really worried about what's going on. I imagine there's even people out there that are stopping their 401k investments and they're freaking out about this. From fear, you go to desperation, panic, and then you get down there where you're so frustrated that you go, how could I have been so wrong? And then that's when you reach right before you reach depression, you've got the point of maximum financial opportunity. And I'm not willing to call a bottom yet. I think there's still a lot of volatility going on out there. Because I'll tell you what I can remember from 2000 was you have to remember in 2002, what I remember from 2002, which is the year that we did start the recovery In October of 2002, I remember we went through 2000 where the market gave back approximately 20%. 2001, the market gave back a little over 12%. And then we come into 2002 and the market was down just awful. I mean, it was bad. I mean, it was down. I know at the end of the year, I believe it closed down 22%. But you have to recognize the recovery started in the month of October. And it was good from October all the way through the end of the year. Really, we were down much further than 22% in 2002. If you can think back, if you were doing any type of financial investing back during that period, you can probably recall that everybody would have thought you were a fool or stupid to be doing anything with equities whatsoever. Equities and stocks became a cuss word. It's kind of like what real estate is doing going through right now. I'm not willing to call a bottom on the real estate because there's still a ton of inventory out there and there haven't really been any policy changes to encourage a change in that front. So I'm not willing to call a bottom on that. But you have to recognize that real estate is not a cuss word like it's becoming in our society these days. And I think stocks are headed that way just as they did back in 2002 as well, where people after a while just go get so tired of this constant emotional drain, they just go give up and say, I'm not done with stocks. I'm not doing this again. I'm just going to sit on the sideline. I can't stand investing in this stuff. I'm never, ever doing anything again. And that's usually the best time to invest. And I know I've used the quote a gazillion times and you probably are so, so tired of me talking about Warren Bernhoff at this point because I've bought the entire last podcast on it and want me to get back on topic with some other issues. But I do think it is very interesting that quote doing it off memory. I've got it somewhere in here actually have the true quote, but I think is paraphrasing is that if you want to be, if you're trying to time the market, if you are not advocating it is something just going from a contrarian viewpoint because there's a lot of value to being a contrarian and doing the opposite of what the average person is doing is that you want to be greedy when others are fearful, and you want to be fearful when others are greedy. So if you can think about it, when everybody is scared to death about doing anything with investments, probably not a bad time to be out there doing something. So we go from depression, which is the point of maximum financial opportunity you're getting in at the bottom because just like markets are overbought, they also get oversold. And that's why you typically see that huge jump that I'm going to talk about in a little bit. You go from depression to hope to relief and then you complete this cycle by hitting optimism once again and starting the cycle all over again. And like I said, if you look at the historical. I've got a slide here that you also can go pull up on the Money guy website@moneyguy.com it's titled bear Markets an appreciation the track of the bear since World War II. I've got this slide now. I know it's ugly, came black and white. My partner Bill sent me this, emailed this over to me. It's the source is Standard and Poor's cited in Simple Wealth, Inevitable Wealth. I think it's a great little slide and like I said, I apologize for it not being presentation ready, but at least I wanted you to have the data. It has the start of the bear markets since World War II and then where the bottom of those bear markets were in the dates and the number of days duration, how long those bear markets last and then the actual percentage decline in the s and P500. So if you go back to May of 1946 to May of 1947, it lasted 353 days is the first bear market they list here. So it was approximately a year and it lost 23%. A lot of you are probably going man, I could handle that. Then you jump in. Let's go into something a little sooner. We've got a good year. The year I was born, 1973 to. From January of 1973 through December of 1974, it was a 694 day bear market and it was down 45%. From September of 76 through February of 78. That's a 525 day bear market. It lost 27%. And then if you go down here and look at something a little more recent. Look at from July 17th of 98 through August 31st of 98. That's not very long at all. That's only about a month and a half period there. The market was down 19%. I can remember I was managing money at that time. So I remember I had a client, we worked with some agents at one of the firms, sports agents at one of the previous firms I worked with and we had a football star that was. He was probably at the twilight of his career and he was starting to get, you know, think about his finances and stuff. And I never felt like he truly trusted us everything, even though I felt like I was always doing everything in his best interest. He just never completely understood. I think he had a lot of people in his ears that were telling him he could double his money by investing in all these crazy schemes that are out there. So he never trusted the boring way that we were trying to make money. And you see that happen a lot with people who come into money. They quite often have somebody whispering in their ear how these get rich quick schemes that are never really what they seem to be, but people listen, they like to hear that stuff. So I remember I had this client, he came in in August and said, I want all of my money out of the market. I can't stand this, this is wrong. You are losing all my money. I want it all out. And I remember feeling so sick that here he is, we'd give him back 20% in this month and a half period. And he was selling out right then. And I told him it was a mistake, but he still did it. So we did it. Because I was, I got to tell you, it was a volatile situation, very nervous. We sold it. And what made me sick, looking back on it, is that if he'd have stayed in there like we were trying to recommend to him, by the end of the year, he would have made back everything he lost and then actually been in the green on all the money that he'd have lost in that month and a half period of time. But emotions do crazy, crazy things to you. Think back now even closer. This is the most recent bear market that was out there from March 24th of 2000 through October 9th of 2002. That was a 929 day bear market. And the market, the S&P 500, lost 49.1%. There's a lot of you that are still hurting from that experience because you have not recovered. Now why have you not recovered is because a lot of you, if you remember what happened before the 2000 fall was that you had the S&P 500 and then a lot of technology stocks and had been on a run for so long that people started thinking that. We still remember people talking about a new paradigm, how we were valuations of companies. The traditional 15 price to earnings ratio was worthless because now companies were so much more efficient, so much more growth was headed their way that a reasonable price to earnings ratio might be 40, 50. There was even companies out there trading at several hundred dollars. You know, their price was $700 over several hundred times their actual earnings. Which is just outrageous to think that this was sustainable for an extended period of time to have these things. I even remember if you all remember that web grocery store, it was web ban or slaughtered. I'm trying to remember if I would have been one of the Smart guys. I'd have bought some of those shares so I could hung up on my wall for all the companies, the dot com companies that went under. But I still remember the webvan. I think it was web banner. Anyway, it was an online grocery store, had more market capitalization than Kroger, Publix and all the other big public grocery stores combined, counting the real estate and everything else. And here you had really a company that had nothing except for a business concept. And people went just gaga over the whole thought that it had.com after their name. Very interesting. But these are things just like I mentioned earlier on the cycle of market emotions, items do get oversold. So if we talk about and this is why a lot of people say, well, Brian, wait a minute, why should I stay in the market? When you just told me that from 2000 to 2002 was the longest bear market since World War II. It was 929 days. The market lost 49%. Why in the world would I want to stay in that market? I'd rather just sit on the sidelines over here in cash, let this pass and then get in. This is why. This is the reason, let me break this into two parts, is because now if you're a person that's retired, already retired, you might need to go look at your asset allocation to evaluate if your goals match up to what you're doing with your money. But for everybody else who's in their 30s, 20s, 30s, 40s, you need to calm down and just sit back and relax because this is why you need to hang in there. You've got time for this recovery and the recovery will occur. You've got time for the recovery because you want to hang in there. And just try to make sure your diversified portfolio is protecting you because you're going to be okay. Because what happens is that markets, as they get oversold, the recovery is huge. Let me give you some facts. And I know I put an article that I've got out there on the Internet that I had published back during the darkest times and I mentioned it in previous podcasts. It's an article titled what yout Should Know in an Uncertain Market. It was published by a local metro Atlanta newspaper on Thursday, October 3rd of 2002. And you can go click on the link@moneyguy.com if you want to see it. What's very interesting about that date is that within six days of that date that I published that article and I published that article because I was getting calls from clients and prospects that they were freaking out about how bad the market was in October of 2002. But if I would have only known that, I could have said, hey, in six days we're going to be at the run of a lifetime here, so just hang in there. But nobody knows that you don't know that you're about to hit a recovery. Because remember, I was at the point and didn't even realize at the point of maximum financial opportunity because everybody was in the depression mode about the investing. So when I wrote this article of what yout Should Know in an uncertain market in October 3rd of 2002, we were within six days of reaching the dead bottom of that longest bear market since World War II. So what happened is the S&P 500 bottomed out at 776 points in the article I referenced. On average, markets rise by 9.8% one month after they reach the bottom of a bear market. Furthermore, if you expand that same period to one year from the bottom of a bear market, the stock market historically rised by 26.2% and over that following 12 month period. So we've now had five years to go back and look at these numbers to see how true they held up. And I think you're going to be surprised to hear that we went from October 9, 2002 to November 8, that first month of recovery, the market returned the S&P 500 returned 15% from October 9, 2002 through October 8 of 2003. The first 12 months after it hit the dead bottom, the market returned an outsized 33%. So we even blew out those historical averages I gave you of 9.8 and 26.2% quite substantially. And that's why you want to hang in there. Because if you're doing the right thing with your portfolio, hopefully you've only got a third to half of the volatility of the broad markets. And then when it comes back, hopefully you're recapturing 2/3 to 3/4 of the upside. That's the power of diversification, is if you can mitigate the volatility. So you're only losing that third to a half of the market, but then you're capturing 2/3 to 3/4 of the upside. That's a winning proposition. That's what you want to get into. That's what's very, very important to making sure you're successful in the long term. That's what I want to remind you is so important. I also put on here a link. My partner, Bill Cleveland, as I've told you all in the past. He's the smart one of the two. I'm just the loud one that talks more. He had an article published March 7, 2008, so not only a few weeks ago. And he's the money doctor. He does a monthly column for this publication out there and I've got a link on it on moneyguy.com as well. It's called Weathering the Storm in Volatile Markets. And what I thought was very interesting that Bill focused on was how we really do have 24 hour news access now and it's gotten where things are so negative. And I think it's because the media has recognized that fear and negativity sells much easier than happy go lucky fun stories. And I'll give you I know this is probably not a completely accurate analogy, but it's still worthwhile noting. I've told many of you guys I serve on the local school board. Down here we're the seventh biggest school system in the state of Georgia. We have about 40 to 42,000 students, depending upon where the growth rate is. But we're big. We're a big school system. And I thought it was very interesting. We have quite a few high schools in the county and we have what's called a Star Student Breakfast, where the students from all the high schools that have the highest SAT scores at each of the high schools, we have a big breakfast that's put on by the chamber of commerce for the county. I'm in and it's just one of my top two favorite events. Working with the school system every year because you really get these kids all get to get up there and give a speech, talk about what they want to do in life. And there's something very exciting about seeing people that have so much potential get up there and see what they want to do with their life. To kind of see them before they actually turn into something and see all that optimism and see where they are with things. It's just very refreshing. So I love going to this event, but it was very intriguing to me. How much media do you think was there at that function? Not one person from the local newspaper, not one person from the metro newspaper, not one person from any of the local radio stations. Nobody, Nada, zip. So it was very interesting, something so positive. We had no representation whatsoever. Now our neighbors to the north, Clayton county, their school board is actually facing the possibility that they might lose accreditation because there's all kind of scandals going on. Guess how many, you know, newspaper crews, TV crews and everybody else shows up nightly at their board meetings and everything else. You cannot tell me the media has not recognized that it's much more profitable to sell bad news than it is to sell the good news that's out there. And they're going to play that upon you as well. So just because the market's down 10, 11, 12% doesn't mean you have to be down that. And very likely you probably not. If you've listened to the advice of the money guy show and you've gone listen to some of these asset allocation shows I've done in the past, you're going to be okay. I mean, I've looked at the performance of our clients. We're okay. It's just trying to keep my clients from freaking out and making that worst decision and selling at the wrong time. By the way, one quick thing before I talk about this Barron's article when we close out the show is that I noticed on itunes that only my most recent shows are showing up, like the last four or five. If you're new to the show and you want to go check out some of these asset allocation shows and some other topics on investing, you don't have to. You can actually go to the MoneyGuy site directly. MoneyGuy.com and we have every one of our shows we've ever done for the last over. I mean, it's going on two and a half years now. You can go download all of them. And I've tried to cover about anything and everything out there. So go through the website and try to figure out. You can download the shows directly from the website too. So go out there and scroll through the show notes and you can see where you can play them either right there on the website or you can download it because I do want you guys to use the website as a resource to help you through these dark times so you can make the right decisions. Now there's an article that I've linked on the website too, called it was written on Barrons Online. It's called Avoid the most Common and Costliest Mistakes in Retirement. And it was written by Karen Hube. And Karen had some good points and she interviewed some interesting people. And I thought it was quite nice what she had put together because it's a lot of what we just talked about in this show, bottom line, simply by making three of the most common errors and those three most common errors are failing to diversify wisely. Check. We've talked about that today, trying to time the market and overpaying on investment expenses you would have missed. So that was two and three. Number two was trying to time the market. Number three was overpaying on investment expenses. You would have missed out on $375,000 of gains on a $1 million portfolio. Now, I know not everybody out there has a one million dollar portfolio, but if you break that down into simple terms over a 10 year period ended January of 2008. So this even encompasses the bad fourth quarter that we had in 2007 and then the dreadful month we had in January. If you would have broken those three cardinal things there by failing to diversify, trying to time the market and three, overpaying on your investment expenses, you would have lost 37%. So don't take out the million dollars if you think that's an unrealistic goal for where you are in life right now. Just recognize that you would have lost 37.5% of your gains that you could have over the last 10 years if you're breaking it out that way. Moving on. And I want to go into each one of these topics separately. Those three costly mistakes. Because she talks about neglecting asset allocation. I thought this was a very interesting thing that she went into. Practically all investors would agree that they want the best returns and the lowest possible risk. But when it comes to setting up a portfolio to deliver on that promise, many investors don't go the distance and they pay dearly for it. She goes on to cite According to a 2007 survey of 401 assets by the Profit Sharing and 401 Council of America, the average investor holds some 25% of 401k assets in his own company stock. Now I've been there, done that with, I used to manage some portfolios for some Lucent managers. Lucent, if you remember, was a company headquartered here in Atlanta, worked with quite a few of their executives back at a previous firm I worked at. And everybody thought Lucent was going to be great forever. But you saw when the dot com boom happened, Lucent got brought down with a lot of the other technology companies that are out there. And a lot of those executives lost about everything they owned because they just wouldn't diversify. They were emotionally as well as politically. A lot of companies have political structures where they discourage their employees from diversifying. I think that's slowly starting to change or hopefully quickly starting to change because of some of the things going on. I've seen these executives that have had over 25% of their assets of their 401 and company stock that have been devastated. Let's talk about something even More recently. What about Bear Stearns last week? What if you had woken up, you had $70 a share, your bear stearns. You had 25% of your 401 in that investment. And then you wake up the following week and it's worth $2 a share. You go from having hundreds of thousands of dollars down to less than $10,000 in your 401. That's disgusting. You've already got enough risk with the company you're working with. I mean, you've got your employment risk, your wage risk, what your earning power is tied to this company. Why would you want financial independence tied to them as well? You need to diversify away from that. So be careful with that 25% or more in your personal employer's public stock. I wouldn't recommend going any higher than probably 5%, 10% only if you got. I mean, you've got to be working for a really great company to go above that 5% guideline that I like to tell people. Beyond that, at least a third of assets are in domestic stocks. If you look at 401 s, less than 8% of retirement plan assets in the United States are in international funds, which as you've seen with the falling dollar, you're much better off recently having some allocation in international because on the world marketplace we're not doing as great because we're getting killed out there on the dollar. So international is a way, if you go out there and buy international holdings, that you can offset some of that falling dollar exposure and fewer than 1% of all 401 assets out there, or even in diversified asset classes like real estate. I thought that was very interesting as well. I know real estate has become a cuss word, but still not a bad idea to have all kind of asset classes represented in your 401k. Let's talk about that second mistake, timing the market. Investors have such a dismal record of being able to time the market that mutual flow inflows and outflows appear to be contrary indicators of which way the market is headed. There's a professor from Santa Clara University in California that goes on to State, and his name is Meyer Stathaman. It says it's not the perfect idiot forecast, he says, but it's close. Ideally, of course, you would want to sell your holdings when the prices are high and poise a drop and buy stocks on sale right before run up in values. But over the past decade, investors have done the exact opposite. The month with the biggest ever net inflows of assets into stock mutual Funds occurred in February of 2000. We talked about that earlier, which was the doorstep of one of the worst declines in history. You go on. And they interviewed Ernie Ackrum, who's the chief investment strategist at Russell Investments. The biggest outflows were also poorly timed. Some of the biggest occurred in the months leading up to October of 2002, when the market hit bottom. Remember what I told you. The reason I even wrote that column in October of 2002 is because I got a ton of calls from my clients and prospects that said they didn't want to have anything to do with the equity markets, the stock market. It was the peak opportunity, or as the cycle of market emotions puts it, the point of maximum financial opportunity. You've got to think about these things. The kind of behavior of getting excited about good news and scared after bad news causes many investors to give up between 2.5 to 3 percentage points a year, according to Ernie, who I've already mentioned was the chief investment strategist at Russell Investments. So quite interesting. The third thing it talks about. Let me give you one more thing about market timing. It says another kind of market timing is more passive, yet still destructive. It's simply to stop feeding more money into your investments and rockier times. And I think there's a lot of people out there probably right now feeling that temptation to stop investing. Don't do it. Because consider this. According to a 2007 study by Dalbar, and you all have heard me, I've mentioned their research in the past. A mutual fund research firm, if you had invested $10,000 in the S&P 500 index over 20 years through December of 2006, just in a pattern that matches actual behavior of mutual fund investors during that period, you would have ended up with a total of about $33,252. But if, however, you had a systematic investment plan that took the $10,000 in equal increments over the 20 year periods, meaning you're investing monthly through good times and bad, you would have ended up with $42,877. The study found that even if you choose a fund that captured only 75% of the S&P 500's return by dollar cost averaging, you would still end up with more than if you had sporadically invested in the S&P 500. The key thing I want you to take from that stat is that you would have ended up with 29% more money if you just bought every month versus trying to time the market by going in when you think things are good or going out when you think things are scary. Because as you've heard from the research, we typically do the exact opposite. We usually sell high. I mean we sell low, I should say. And then we buy high because we buy when the news is good. And then as soon as it gets bad, we're scared to death to buy anything. Which is usually the bargains out there. The last thing that it mentions in this article and then we're going to close up. The show is paying too much. It says. Consider this, the S&P 500 index funds. While the performance of these funds is practically identical given that they mirror the same index expenses all over the map. Some funds charge no load. That's like your Vanguards and your fidelities. Some have no load but do have a so called 12B1 fee. That's another back end type commission payment fee which is an operating expense. And yet others have both a load and a 12b1 fee. A 2006 study by XeroAlpha Group found that if you invested $10,000 in these funds for 20 years, meaning an S&P 500 fund over 20 years and earned an average annual 10% gain. Not unrealistic, it said. It found that the average investor would have paid a difference of in the lower cost funds $2582. And then in the 12B1 fees they would have paid 3744. And then in the commission and the 12B1 you would have paid $7600. So there's a $5018 difference on a $10,000 investment over a 20 year period that you would have paid. That's money you could have earned additional earnings on that you would have had for retirement, you'd have had for financial independence. So pay attention to the fees you're paying in these mutual funds. It is very important to watch those three things that are mentioned in this article. You want to make sure you're diversified. You want to make sure you're not getting crazy with the timing. Because we all know that we're inadequate. We're very emotional beings. So emotion seems to trump the analytical side of us. So just take that out. Have a good systematic plan. Stick to the plan, know what you're doing, think about it in a logical standpoint, analytically, what your goals are, how long you have to retirement, how much you're going to need in retirement and put together a plan and stick to it. Don't try to time. And then third, of course, watch the expenses that you're paying out there. So I hope that you've been able to walk away from listening to this podcast today and know that it's not so bad that you should just give up, because you're going to be okay. So there's still probably some of you out there. Go, Brian. This is pretty bad, though. What are we going to do if this thing never recovers? Because there's always people out there that think throughout history that this is the worst of times and that we're never going to recover. Let me go ahead and put that discussion to a close. If you think that the economy will not recover, because now maybe we're more of a global marketplace, or maybe we're in a new paradigm where the US Economy is just not competitive anymore. We've got much bigger problems than the stock market. What is the engine for this economy? What drives this country? What pays the taxes? That pays for all, you know, your police officers. That pays for the infrastructure. It is the small business owners. It's the Fortune 500 companies. It's the economy as a whole working together. And you've got to count on the innovation of business owners. And the desire to make more profit is going to work over the long term. You also have the ability of the government to change the rule book at any point in time. They're showing that, as of me recording this podcast, they have not cut the rates for today, but it is anticipated today they're going to drop rates significantly. The government can change the rule book at any point in time. They can change tax policy, they can cut interest rates. They can do anything they want. There is no limit to what they can do. Everything you have, like your real estate, everything you own, is really tied to the health and security of our government. And if our economy is not going to work, if we're done, if capitalism does not work in the United States anymore, who cares what's going on with your stock portfolio? Because you need to go find an island out in the Caribbean. You need to go find some other place, because it's just not going to work anymore. So I say that argument is just a void argument because there's no positive, there's no side plan to it for the average person. The only people that might be able to take that into account is if you have a net worth over 5 to 10 million dollars. Maybe you want to go put a million dollars outside the United States to protect you from that danger. But for the average investor out there, don't worry about that type of stuff. That's noise. That's going to be the stuff that gets in your head and causes you not to make the right decisions that will have you. When you get to that age of 60 to 65 and say, wait a minute, why don't I have enough money for retirement? It's because you talked yourself out of it and you can't let those emotional decisions get the best of you and keep you from reaching the true peace of mind that comes from financial independence. So thanks so much for listening. I will go ahead and tell you guys I'm going to be on vacation. Well, it's not really. I'm taking an extended weekend. It's too busy to take a full vacation. I'm taking an extended weekend at the end of this week, but I've got another show in the can for next week that I will be putting out hopefully Monday or Tuesday of next week. Just the show notes might be a little tight, not as deep and in depth as I've done in the past, but thanks so much for your help. Thanks so much for supporting the show and I will talk to you soon. Bob, this is your host, Brian Preston. The Money Guy podcast is hosted by Brian Preston and Brian Preston is a partner with Preston and Cleveland Wealth Management. Preston and Cleveland Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with securities laws and regulations, Preston and Cleveland Wealth Management does not render or offer to render personalized investment or tax advice through the MoneyGuy podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice. The holidays mean more travel, more shopping, more time online and more personal info in more places that could expose you more to identity theft. But LifeLock monitors millions of data points per second. If your identity is stolen, our US based restoration specialists will fix it, guaranteed your money back. Don't face drained accounts, fraudulent loans or financial losses alone. Get more holiday fun and less holiday worry with LifeLock. Save up to 40% your first year. Visit LifeLock.com podcast terms apply.