Podcast Summary: "What Not to Do When the Market Is Down with Peter Mallouk"
Podcast Information:
- Title: Money Rehab with Nicole Lapin
- Host/Author: Money News Network
- Description: Nicole Lapin, a New York Times best-selling author and financial expert, hosts Money Rehab to provide listeners with practical, bite-sized financial advice. Episodes are approximately ten minutes long, focusing on actionable tips without the fluff. Nicole encourages audience interaction by inviting listeners to submit their money-related questions.
- Episode: What Not to Do When the Market Is Down with Peter Mallouk
- Release Date: April 15, 2025
Introduction
In this episode of Money Rehab, Nicole Lapin welcomes back Peter Mallouk, President and CEO of Creative Planning, a prestigious wealth management and advisory firm managing over $354 billion in assets as of December 31, 2024. Nicole and Peter delve into strategies for navigating market downturns, emphasizing what investors should avoid and the best practices to adopt during bearish periods.
Understanding Bear Markets
Peter Mallouk begins the conversation by likening bear markets to recurring genres in movies—each with a similar overarching theme but distinct storylines. He explains that bear markets, characterized by significant market declines, are inevitable every few years.
Peter Mallouk [03:53]: "If you've been doing it a while, you just embrace it. You just embrace it."
Nicole adds that bear markets are inevitable and comparing them to familiar movie genres helps investors maintain perspective.
Investor Behavior and Emotional Responses
A significant portion of the discussion centers on how individual investors often react impulsively during market downturns, leading to detrimental financial decisions. Peter emphasizes the importance of staying calm and not succumbing to panic.
Peter Mallouk [09:54]: "The panicked investors, the worry, the biggest mistakes come from the panicked investors."
He contrasts this with the behavior of Creative Planning's clients, who remain unfazed due to their well-structured portfolios and ongoing financial education.
Strategic Responses to Market Downturns
Rebalancing Portfolios
Peter advocates for opportunistic rebalancing during bear markets. Rebalancing involves adjusting the portfolio to maintain the desired asset allocation, thereby buying low and selling high.
Peter Mallouk [11:33]: "I'm a big fan of rebalancing in a bear market."
Tax Loss Harvesting
Another strategy discussed is tax loss harvesting, which involves realizing losses to offset taxable gains, effectively reducing the investor's tax liability.
Peter Mallouk [12:17]: "It's something we do regularly, and there's so much that goes into it."
Peter explains how this strategy can provide additional returns beyond the standard market gains.
Asset Class Opportunities
Peter highlights the importance of ownership investments during recessions, such as stocks, real estate, and private equity, which are typically available at discounted prices. He also touches on the unusual behavior of the bond market in the current downturn, noting that both bonds and stocks are declining simultaneously, which is atypical.
Peter Mallouk [22:34]: "The big opportunities in a recession are building the ownership part of your portfolio."
Communication and Client Management
Balancing empathy with professional advice is crucial when managing client portfolios during downturns. Nicole and Peter discuss the role of financial advisors in providing reassurance and education to clients, ensuring they remain committed to their long-term financial plans.
Peter Mallouk [10:25]: "The biggest mistakes come from the panicked investors."
Recession Predictions and Economic Outlook
The conversation shifts to the current economic climate, with Peter assessing the likelihood of a recession. He notes that while some indicators suggest a mild recession may be imminent, the situation is dynamic and subject to change based on geopolitical developments, particularly the ongoing trade tensions with China.
Peter Mallouk [27:58]: "I think that the odds are probably still less than 40%."
Opportunities Amidst Downturns
Peter emphasizes that recessions present unique investment opportunities, especially in quality ownership assets that are undervalued. He advises investors to remain focused on long-term growth and to leverage the downturn to strengthen their portfolios.
Peter Mallouk [23:23]: "Going as far into that as you possibly can is the perfect time to be doing it."
The Role of Financial Advisors
Concluding the episode, Peter underscores the importance of having a dedicated financial advisor, especially during volatile market conditions. He advises listeners to seek out fiduciary advisors who are committed to their clients' best interests and who provide comprehensive financial planning.
Peter Mallouk [31:35]: "If you have a plan and all the investments are pointed towards your specific goals, you're more likely to hit your goals that way."
Key Takeaways
- Stay Calm: Emotional reactions during market downturns often lead to poor financial decisions. Maintaining composure is crucial.
- Rebalance Opportunistically: Use market declines as opportunities to adjust your portfolio, buying low and selling high.
- Tax Strategies: Implement tax loss harvesting to offset gains and reduce tax liabilities.
- Long-Term Focus: Keep a long-term perspective, especially if you're a young investor, to benefit from market recoveries.
- Seek Professional Advice: A fiduciary financial advisor can provide tailored strategies and reassurance during uncertain times.
Notable Quotes with Timestamps
- Peter Mallouk [03:53]: "If you've been doing it a while, you just embrace it. You just embrace it."
- Peter Mallouk [09:54]: "The panicked investors, the worry, the biggest mistakes come from the panicked investors."
- Peter Mallouk [11:33]: "I'm a big fan of rebalancing in a bear market."
- Peter Mallouk [22:34]: "The big opportunities in a recession are building the ownership part of your portfolio."
- Peter Mallouk [31:35]: "If you have a plan and all the investments are pointed towards your specific goals, you're more likely to hit your goals that way."
Conclusion
This episode of Money Rehab provides invaluable insights into managing investments during market downturns. Peter Mallouk's expert advice, combined with Nicole Lapin's engaging hosting, offers listeners practical strategies to safeguard and grow their portfolios despite economic uncertainties. Emphasizing the importance of emotional discipline, strategic rebalancing, and professional guidance, the episode serves as a comprehensive guide for investors looking to navigate bearish markets effectively.
For personalized financial advice, listeners are encouraged to reach out to Creative Planning for a free 15-minute consultation creativeplanning.com.