What if trying to protect your money is actually putting your financial future at risk? Market volatility, political uncertainty, and the excitement surrounding artificial intelligence can make even experienced investors question their decisions. But while we spend a lot of time worrying about what the stock market might do next, we don't always consider how our own reactions can affect our long-term financial success.
In this solo episode of the Stuff About Money podcast, financial advisor Erik Garcia, CFP®, ChFC®, BFA™, explores three things every investor should understand: how markets work, how investors feel, and how successful investors behave. Through historical market data and a real-life story about a husband and wife who took very different approaches to investing, Erik explains why avoiding volatility isn't the same as avoiding risk, how fear and FOMO can derail a financial plan, and why staying disciplined through uncertainty may be one of the most important investment decisions you make.
Episode Highlights:
Since 1980, the stock market has averaged a 14% decline at some point each year, yet still finished positive roughly three out of four years. (02:28)
Erik explains why nobody knows what the stock market will do next, no matter how convincing the predictions sound. (05:09)
Erik breaks down the difference between volatility and risk from a financial planning perspective. (07:07)
The S&P 500 averaged about 10% over 100 years, but 26 of those years were negative, a reminder that the average return isn’t the actual experience. (09:03)
Erik shares how a client who moved her investments into cash didn’t eliminate risk but introduced a different kind of risk. (11:32)
Erik explains why being excited about AI and making a good investment in AI are two different things. (14:17)
Since 1938, the S&P 500 has posted a gain in the 12 months following a midterm election 95% of the time. (15:48)
Successful investors start with an actual financial plan that balances the risk they need to take against the risk they can tolerate. (17:10)
Charles Schwab data shows that missing just 10 of the best trading days over 20 years dropped annualized returns from about 11% to 6.6%. (19:09)
Erik shares why sometimes the best thing to do with your investments is nothing. (20:41)
Before making an investment change, Erik encourages listeners to ask whether something changed in their financial life or simply in the headlines. (23:09)
Key Quotes:
“ We can't eliminate emotions from investing, but we can learn to recognize when those emotions might be influencing our decision that are contrary to our goals.” - Erik Garcia, CFP®, ChFC®, BFA™
“The goal of investing isn’t necessarily to eliminate volatility, it’s to take the appropriate amount of risk to accomplish our financial goals.” - Erik Garcia, CFP®, ChFC®, BFA™
“Maybe being a successful investor isn’t so much about getting better at predicting what the market’s gonna do. Maybe it’s about getting better at understanding how we’re gonna respond when the market does something we didn’t expect.” - Erik Garcia, CFP®, ChFC®, BFA™
Resources Mentioned:
Erik Garcia, CFP®, BFA
Xavier Angel, CFP®, ChFC, CLTC
Plan Wisely Wealth Advisors
