Episode 3 - Buying and selling on emotion
In this episode of Blue Money, Jim & Kevin are talking us through these turbulent times.
The guys at Valley Financial understand that during times like these, people tend to stress more about their finances.
Kevin starts off by sharing some historical market numbers to give us perspective on the volatility of the current market.
Jim makes a great point when he says that technology could be doing us a disservice.
Listen at 2:50 to find out what he means by that.
Could we be too connected?
Kevin gives examples of how staying for the long-haul can pay off.
The guys have two pieces of advice for you to take away from this episode.
Listen at 5:00 for these quick takeaways.
You may even be doing it already without realizing.
Have you heard of “dollar cost to average?” Kevin & Jim discuss what it is and why it’s so important.
This could be a new way for you to look at investing to maximize your return.
Kevin & Jim end this episode by answering a listener’s question.
They are giving you a simple calculation to determine a rough estimate of the value of your pension.
To contact Lt. Jim Donnelly: firstname.lastname@example.org
To contact Kevin McGarry: email@example.com firstname.lastname@example.org
To schedule a free financial assessment, fill out the form below.
Episode 3 – Buying and selling on emotion
Announcer: This is Blue Money. A finance podcast made for cops by cops. With us you know your money safe. Lieutenant Jim Donnelley of the Bensalem Police Department and co-host Kevin McGarry of Valley Financial Group come together to help protect and serve your financial needs. This is Blue Money.
Jim Donnelley: I want to welcome all the listeners to the Blue Money podcast here at Valley Financial Group. My name is Jim Donnelley. I’m a financial advisor at Valley financial, and I’m also a police Lieutenant at the Bensalem township police department. I’m here with my co-host Kevin McGarry.
Kevin McGarry: Jimmy D.
Jim Donnelley: Who’s the management partner at Valley Financial. And today the episode that we’re going to be hit upon really is buying and selling on a motion. And it really couldn’t happen at a better time. Russia invaded Ukraine last night, the pre-market this morning, Dow Jones was down 800 points. Yesterday I think it was down about 450 points. We gotten crush this week. So, I know a lot of guys out there, a lot of police officers were on edge, looking at their portfolios, looking at their 457s and just wondering do I in stay the market or do I going to cash. What should I do? And Kevin, I just want to know. Do you have any feedback on that for the guys?
Kevin McGarry: Yeah. I think what we need to do is make people feel comfortable and it’s hard to make people feel comfortable when you got Russia invading Ukraine, you got inflation through the roof, you have possible interest rate hikes. No one’s certain how many they’re going to give. You have expensive stock prices. And you got a lot of issues in the US with the border and crime right now. So, there’s a lot of uncertainty out there. But I can tell you this is, we’ve been through things before. And to give you example, we’ve been through geopolitical events like Russia attacking Ukraine. And I’ll give you a few examples here, Jim, I ran drone strikes against Saudi Arabia. The SAP performed the first three months was up around over five and a half percent. Over six months, it was down 10%. And over one year it was up 11. 911, we all remember those horrible events. The first three months, the market was up four, the next six months, the SAP was up seven and the one year it was down 17%. What I can tell you over that time since 911, the market’s one in one direction, not all the time, but over the long haul, it’s one up. So, it’s really just speaking to someone and really staying invested, that’s what we’re looking at right now.
Jim Donnelley: No, I agree. I mean, first of all, Russia, I mean, they don’t want us to send Rocky [inaudible 00:02:34] back over there. I mean, they didn’t remember Rocky [inaudible 00:02:37]. We could take care of the problem real quick.
Kevin McGarry: We know where to get them.
Jim Donnelley: Get Rocky back where you grew up we were [inaudible 00:02:43] Kev, but yeah. Now on a serious note though, seriously Kev, the thing that’s really hurting police officers today and including myself, is technology really plays a role. And what I mean by that is when I first started investing, I used to quarterly statements from ICMA [inaudible 00:02:59]. I’d get them, you know, four times a year. They would just to really tell you where my account was or if I was up, if I was down and I would look at it and I wouldn’t really study it too hard, and I’d just put it in my drawer. And that was the end of it. I’d move on.
Kevin McGarry: Best thing to do.
Jim Donnelley: But now with technology, I can check my account on my phone. I could check on my desktop. I could check it 24/7. So, a lot of police officers they just want to know they want to know what their account’s doing. It’s important. It’s an asset to them. And they just constantly look at it and they beat themselves up with it. So, they’ll see the pre-market going down 800 points. They realize their account’s going to take a hit. They don’t do. They don’t know what to talk to. They want to jump off the ledge. So, that’s why we’re here to try to tell people, listen, guys, you got to remember, this is a marathon, not a sprint. That’s our whole point of view of investing. You’re not going to get rich overnight. It’s a marathon.
Kevin McGarry: Just to give you some examples of that, Jim, like let’s think about 25 years, quarter a century, is missing 40 days of work during 25 years a lot?
Jim Donnelley: No, no.
Kevin McGarry: Let’s say you missed the best 40 days in the market that time during that last 25 years. You invest a thousand dollars in the SAP 525 years ago, and you missed 40 days, right? You just missed those days. Best days, your thousand is now worth $513. Almost a 50% decline.
Jim Donnelley: Well, just missing 40 days.
Kevin McGarry: Just missing 40 days. If you missed the best 10 days, you missed 10 days. Probably the last two years of work.
Jim Donnelley: Yeah. Yeah. Perfect defense.
Kevin McGarry: But your thousand grew to $2034. If you were invested fully invested all 25 years, your thousand would be worth over $4334. That’s what it would be at today. So, what’s this teach us? We’ve been through geopolitical events and what this teaches us. We’re going to continue being through events like this in our lifetime. It’s not time in the market, it’s time in the market. And that’s how we get through this.
Jim Donnelley: And I think there’s two important takeaways, Kevin, that police officers could take or anyone that’s investing. And so that their emotions don’t really play a role in their decision making. And one, is you got to be diversify your portfolio, that that will help you get over these big crashes. And the second one really is dollar cost to averaging. And if you’re going to touch upon dollar cost average, and a lot of police officers are doing it now, they don’t realize they’re doing it, but can you hit upon that, Kevin really what that is?
Kevin McGarry: Dollar cost average is a great strategy. You do it if you have a 401k or a 457, you’re contributing to your accounts each month. And basically what you’re doing there is taking the emotion out when to buy and what. When markets are volatile, it gives you the opportunity to buy stocks at a discount and really help the account grow over time.
Jim Donnelley: And like this event right now at Russia attack in Ukraine, we call this a Black Swan, Kev. And that’s like what 911 that this war, COVID. Can you really touch upon when we call something about Black Swan on investing? What that really means?
Kevin McGarry: Yeah. I mean, listen, take a step back here. We diversify our clients and we recommend clients to be completely diversified amongst stocks and bonds that meet their risk downs, their time horizon, their needs and their goals. We can plan for a lot of things, but when Jimmy mentions the word Black Swans, these are things that are out of our control. Like COVID, like Ukraine being invaded, like 911. So, these are things you can’t plan for but what I can tell you is, and what we’ve seen here is you get through it. It’s painful. It hurts. It’s ugly on your statements, but if you stay the course, most of our clients and most investors have been rewarded.
Jim Donnelley: That’s a great point. Kevin everyone just needs to stay the course, stay focused and think of the interim goal. Kevin, we had a question from one of our first two podcasts who wrote in. Had a question about the value of their pension. Now we don’t have the exact formula in or somebody formulas out there, but just if we can give this officer a rough estimate, how to really calculate what their pension values worth and here at value, how do we really do. A quick countdown of that so guys out there could realize what their pension’s worth.
Kevin McGarry: Well, well, the first thing is what’s great about a pension is its lifetime income, right? How many years do you think an officer or a law enforcement employee works or when do you think they retired, Jim?
Jim Donnelley: I would say 50 between 55. It all depends different organizations, but at Bensalem, we can retire at 52.
Kevin McGarry: 52. So, let’s say you’re going to spend 30 years in retirement. The average pension we’re seeing is between 7 or 9,000 a month before tax. Let’s just say your pension is $7,000 a month, over a year that’s 84,000, over 30 years, that’s over two and a half million of retirement income you’re going to be getting. Pensions come in handy, especially in times like this.
Jim Donnelley: That’s a great point. Kevin, a lot of these pensions, a lot of officers I know at Bensalem, we have a spousal clause in there that if I do pass away, my spouse will be entitled to half of that. But we got guys will remember 7,000 seems like a lot a month, but if your spouse was only living on $3,500 a month, that’s half, it’s not going to be quality of life that she could have. So, that’s why it’s so important guys out there starting make sure you’re investing in your 457 and your drop money and you’re doing the right things because we’re not going to be here forever. It’s just so important and you know we always got to take care of your family. So Kevin, that’s going to wrap up the podcast for today. I want to thank you for your time today.
Kevin McGarry: Yeah, no problem. Just remember this, this is a lot of noise out right now, it’s a lot of fear. But investors have been rewarded historically by staying the course and being diversified and dollar cost averaging as Jimmy mentioned.
Jim Donnelley: And I also just want to thank the listeners out there for tuning in the Blue Money podcast. If you have any questions about any podcasts or any portfolio reviews or anything you might need in the financial industry, please don’t hesitate to reach out to Kev and me directly. Our contact information is going to be in the show notes. So, please be safe out there guys and stay of course, stay in the game.
Kevin McGarry: Stay in the game.
Announcer: Thanks for listening to Blue Money, to learn more about Jim and Kevin or for a free financial assessment, visit valleyfinancial.com or click on the link in the podcast description or show notes. Until next time safe investing.
This material is intended to be educational in nature and not as a recommendation for any particular strategy approach, product or concept for any particular advisor or client. These materials are not intended for any form of substitute for individualized investment advice. This discussion is general in nature and therefore not intended to recommend or endorse any asset class security or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment clients as well as all other readers are encouraged to consult with their own professional advisors, including investment advisors and tax advisors. Valley Financial can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.