Podcast Summary: Suze Orman's Women & Money (And Everyone Smart Enough To Listen)

Episode Title: Suze School: Now Is Not The Time To Panic
Release Date: January 30, 2025
Host/Author: Suze Orman Media

Introduction to Suze School

Suze Orman kicks off the episode by addressing the audience's concerns following a recent stock market downturn, particularly focusing on the volatility witnessed in the Magnificent Seven stocks. She introduces the concept of "Suze School," a special segment designed to educate listeners on navigating financial turbulence.

Suze Orman [01:02]: "Susie's school is now in session."

Understanding the Federal Reserve's Decision

Suze delves into the implications of the latest Federal Reserve meeting, where the Fed funds rate remained unchanged. She emphasizes the unexpected nature of the decision, which contrasts with previous market expectations of rate cuts.

Suze Orman [01:45]: "I think it will be absolutely amazing if in this entire year of 2025 we get one more rate cut, maybe two, but I doubt it."

She explains how the Fed's decision influenced mortgage rates, tying them directly to the 10-year Treasury yields. Currently, mortgages hover around 7%, and Suze advises caution for those considering purchasing real estate.

Suze Orman [03:15]: "If you were going to be buying real estate right now and I had to take out a mortgage, I think I would probably wait till about September to do so."

Navigating the Stock Market Volatility

Transitioning to the stock market, Suze reassures listeners that volatility is expected in 2025. She highlights the sudden drop in AI stocks due to advancements by China, specifically mentioning the Deepseek AI app as a catalyst for market fears.

Suze Orman [05:30]: "There is no way that I am going to download this app and probably all the information that everybody is using on it... It's your money. If you don't feel secure, then you have to sell."

Suze advocates for a long-term investment perspective, particularly with strong, quality stocks like Nvidia. She cautions against emotional reactions to market dips, sharing a personal anecdote about a friend who hesitated to sell Nvidia at a loss and subsequently benefited when the stock rebounded.

Suze Orman [09:50]: "You have to understand the role that emotions play in investing."

Investment Strategies: Dollar Cost Averaging vs. Value Cost Averaging

Suze outlines fundamental investing principles suitable for turbulent markets. She emphasizes the importance of dollar cost averaging—investing consistent amounts regardless of market conditions—and hints at introducing value cost averaging in future episodes.

Suze Orman [18:25]: "The rules of investing are dollar cost averaging or value cost averaging."

Comparing Market Weighted and Equal Weighted ETFs

A significant portion of the episode is dedicated to educating listeners on the differences between market-weighted ETFs like SPY (Standard and Poor's 500 ETF) and equal-weighted ETFs like RSP (Invesco Equal Weight S&P 500 ETF).

• Market Weighted ETFs (SPY):

  • Explanation: Investments are weighted based on market capitalization.

  • Impact: Dominant stocks like Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla constitute 31% of the ETF.

    Suze Orman [20:10]: "The top seven stocks of Spiders Spy are of course your magnificent seven... so when those stocks all technology go down, they crash."

• Equal Weighted ETFs (RSP):

  • Explanation: All 500 stocks in the S&P 500 have equal weighting.

  • Impact: Reduced impact from a few dominant stocks, leading to less volatility.

    Suze Orman [23:45]: "In the equal weighted ETF, every single quarter, the fund needs to rebalance all of its stocks."

She compares the recent performance of SPY and RSP, noting that while SPY was up 1.60%, RSP outperformed it by 2.67% over the past 29 days. However, Suze also points out that in 2024, SPY outperformed RSP by 12.4%, highlighting the cyclical nature of ETF performance based on market trends.

Suze Orman [25:00]: "In 2024, just out of curiosity, the SPYs outperform the RSPs by 12.4%."

Investment Alternatives and Recommendations

Suze discusses alternative investment avenues outside the stock market for those seeking security:

• Intermediate-Term Bonds and Treasuries:

  • Suggestion: Focus on 3, 5, and 7-year term bonds.

    Suze Orman [12:10]: "I really still like the three and the five and seven year term. If you're going into Treasuries, I just do."

• Certificates of Deposit (CDs):

  • Promotion: Encourages listeners to consider re-investing in CDs at Alliant Credit Union, highlighting attractive interest rates and flexible maturity options.

    Suze Orman [15:30]: "The 12 month can be 12 month, 13 month, 14 month... it’s a great deal."

• Money Market Accounts:

  • Advantage: Liquidity combined with competitive interest rates.

Final Thoughts and Empowerment

Suze wraps up the episode by reinforcing the importance of prioritizing personal security over market speculations. She underscores the mantra:

Suze Orman [26:10]: "Together we will rise we are strong, we are wise."

She encourages listeners to listen to their instincts, maintain diversified portfolios, and remain patient, assuring them that persistence and informed strategies will lead to financial stability and growth.

Key Takeaways

1. Stay Informed and Patient:

   • Understand the broader economic indicators like Fed decisions and their impact on personal finances.

2. Long-Term Investment Focus:

   • Emphasize quality stocks and diversified ETFs to weather market volatility.

3. Emotional Discipline:

   • Avoid panic selling during market dips; instead, utilize strategies like dollar cost averaging.

4. Diversify Investment Portfolios:

   • Balance between market-weighted and equal-weighted ETFs based on personal risk tolerance.

5. Explore Alternative Investments:

   • Utilize bonds, treasuries, CDs, and money market accounts for secure financial growth outside the stock market.

Conclusion

In "Suze School: Now Is Not The Time To Panic," Suze Orman provides a comprehensive guide to navigating uncertain financial landscapes. By blending practical advice with empowering messages, she equips listeners with the knowledge and confidence to make informed investment decisions, ensuring lasting financial security.

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