Hi, I'm Jennifer Foster one of the Premier Investor
Coaches of South Florida with SmartPlan Investing.
We have offices in Jupiter, Florida and Atlanta
Georgia. Today I'm continuing my series on 4 Common
Investing pitfalls. If you have just join us
for the first time, I want you to know that there is
an introduction video and there's a video on common investing
pitfall number one Stock  Picking, so before you proceed
I encourage you to go back and find those videos if
you haven't already seen.  You can find those
on our YouTube channel. One of   the areas that we
really focus on with investors is helping them to
uncover their blind spots.  I’ll  illustrate
this in a  moment. The blind spots can be a real danger
when it comes to investing.  Just like the pitfalls.
The circle here represents like all the information
that’s noble in the universe. This little
circle right here, represents maybe all the
information that's in google. This first piece
of the pie here is what we know.  This is not drawn
to scale, because obviously we probably- no one
here knows more than Google, but we're just doing
this for illustrative purposes. This area here would
be what representing what we don't know. Underneath
here would be the things that we don't know- that we
don't know. Which are also called her Blindspots.
if we don't know we don't know when we can't
see them.  There’s also what we know, that's not so.
It means it's information we know, but it's wrong.
That is also in our blind spots. Let me ask a
question what can you do with what you know that you
know?
You can use it. What can you do with what
you know that you don't know? You can learn it and move
it to what you now know. What can you do with
what you don't know, that you don't know? Absolutely
nothing. In this video today we're going to help
you to  uncover a blind spot that you might
have when it comes to investing? And we're gonna talk
about Market Timing. Right now when I'm shooting
this video we are in the middle of a pandemic of 2020.
called a coronavirus or COVID-19 many people
have stayed home because they maybe are in essential
workers and what is that a lot of people are cleaning
out closets. I think that if we start with the story
it will help you, making more sense when we talk
about what Market Timing is. I don't know about
you, but I do this often when I clean out my closet. I'll
probably hold onto things for a long time and finally
I'm like this is no longer cool, it's no longer in style,
it's never coming back. So I’ll just gonna get rid of it.
I've done it with Jean Jackets. I had these really cute
pink corduroy pants that I loved, they were even a little
bootleg. I remember when skinny jeans came
in and skinny pants I thought there's no way I'm wearing
that. I'm always gonna wear boot leg pants and that
definitely has changed. I even remember
talking to my mom when I was a kid and she said are used
to have bellbottoms in the nose came back in style
and so a lot of time styles come back. There's
somethings are just timeless or they just come back
more often. I've done this many times I've cleaned
out my closet, maybe you're doing it right now. You're
cleaning out your closet and you're saying this
item isn’t  cool anymore. It’s not in style, doesnt
look good on me, or whatever. And you get rid of it.
Just like when you're cleaning out your closet
and getting rid of some thing that doesn't seem to
be in style or doesn't seem to be cool anymore. Some
investors do this when it comes to their investment.
There's two different types of investors.
There's investors who say when the markets going
up, I want to buy and when the markets going
down. Like it did in March 2020 during this pandemic
when it took over 30% drop in a very short amount of
time wanted to selling it and get out  when it was going down.
That's one type of investor, wants to buy
when it's going up and wants to sell when it's going
down. Then there's the other investor who says
I want to buy when it's down and I want to sell when
it's up.  We’re  gonna get into that in a little
bit because that investor is actually a much more
rare investor.  As humans we have this thing in our
brain that's called an amygdala and it fires off
when we feel that there is some sort of danger. If a
kid goes darting into the street we don't sit there
and think oh should I be worried, no we just react.
You become Superwoman or Superman and
you're jumping across cars and buildings and you're
growing a child you're bringing them to safety and
that amygdala serves as well when there is a danger.
The problem is when there is a probable danger like
I could lose all my money, then amygdala fires off.
In our human nature our fears anxieties and all the
stuff you know we want to move away from the danger
and toward safety. What some investors will
do id they will sell something in it when it's going
down, and then they'll try to wait when they perceive
that the danger is gone, when the markets have gone
up for a long enough period of time where they feel
safe and try to get back in. i want to just go right
back to Business  101, I'm sure you've worked for
a company, maybe even owned one.
Same is true in the stock market yet investors when
they make the misfiring and there's fear they can
often do the complete opposite. We believe that
Market Tming in all it's forms is destructive
behavior. Back in 2007 we had two elderly clients,
women who I know for them they're American Dream
was that they would not become a burden to their family
and their old age now. In 2007 the fourth quarter the
market started seeing some negative returns, but
it wasn't anything to be too worried about. We have
that we know from time to time the market to going
to go down, but we went through 2008 most investors
remember the housing bubble, the credit bubble and
we went through literally a year and a half of negative
returns. Here these women are thinking this is
all I have for the rest of my life. it’s going to go to
zero, I'm gonna lose everything. I'm gonna become
a burden. And no matter what amount of coaching that
amygdala was firing and they were trying to flee
from the dangers of the perceived dangers and they
got out of the market 3 to 4 weeks from when the market
started taking its recovery. They told us I will
never get back in the market and what happened is
they weren't able to recover their losses. They locked
in a year and a half worth of losses never to recover
again. The investors who actually stayed put
recovered in about two years. There are studies and
we're not gonna show them today but we show my biweekly
coaching calls their studies that show the investors
actually stay put versus those who try to get in and
out of the market at the right time actually fare better.
So staying put it would've fared better than getting
out. I mean they got out I just the wrong time because
they just waited a few more weeks the market started
to recover. So that is one way that Market Timing
shows up. We’re seeing Market Tming another
way right now. There's actually two ways were seeing it:
One way is that there are people who don't have
money in the market or they have some money on the
side and they're trying to figure out well when's
the best time to get in the market. We all know that
we want to buy low and sell high, we've already discussed
that right? Stocks were on sale for the first time
in like a decade. The smart investor just saying
I want to get in I want to get it as quick as possible
I wanna take it vantage of while stocks are low
So you have that one type of investors like
I want to get it now but then you've got the one who's
like I'm not sure, is it gonna go down even more? Will
it go down again? Is this the bottom? They're trying to
time and figure out when is the time to get in and out .
What I do know is, that now it's always the right time
to be a prudent investor.
Do I know if the markets  gonna go back down? Will it go down more than it went down in
March 2020? I don't know. Have we seen the
bottom? I don't know
there's just so many unknowns when it comes to investing.
If you have an investing strategy that's designed
to always be buying low and selling high because
they're different areas of the market that you can
invest in. Those can always be buying opportunities.
You don't have to try to figure out if now is the right
time. Unfortunately the ones sitting there
on the sideline saying I'm not sure, should I get in
now or should I wait because it could go back down, actually
missed out on about a 15% to 20% opportunity.
The market has already in a very short amount time,
less than two months has already taken a huge recovery.
Now if they want to get in they’ll actually be buying
at a higher price and they would've two months
ago. As you can see Market Timing just does not work.
We believe that Market Timing in all it's forms is
destructive behavior, and that you can utilize an
investment strategy, a structured portfolio that's
designed to buy low and sell high. There's a few
more points that I want to make real quick and
that is that if you get out of the market when it's
down you missed the recovery opportunity , and you  lock
in your losses. If you're waiting on
the sidelines and there's a run up there's an opportunity
there that is messed. Then there's also Market Timing
in disguise. You may not be handling your investments,
you may be hiring somebody else to do that for you
and you can believe that you are a long-term investor.
That you don't believe in Market Tming and even
the advisor can tell you that they don't believe
in Market Timing, but another way that we have seen
Is that the fund managers of the mutual funds that
you invest in there the ones that are actually picking
and choosing what goes into the portfolio as many
of the time. They might be doing the Market Timing
for you and there's a difference between market
timing and rebalancing. With rebalancing and will
get into that at a later time is actually just putting
your portfolio back to the targets or let's just
say the percentages in which you agreed that you
wanted your portfolio to be invested in. For  example
maybe wanted it or maybe that portfolio was designed
to be in 10% of the U.S. Large or the S&P 500. Well as the
S&P dropped it becomes less than 10% so with rebalancing
would just buy the fit sell off the thing the high and
buy the thing that's low, and put it back to its 10%. That’s
not Market  Timing, that's rebalancing. Market Timing
is moving the assets based on a forecast or prediction.
Trying to figure out what's going to do well or not
do well in the future. It's completely different.
That’s usually selling low and buying high versus
when you're doing rebalancing you're buying low
and selling high. A fiduciary is somebody that
has to do what's in the client or investors best interest.
It doesn't necessarily mean just: one way that
you can measure that is if the investment advisor
can offer two similar products that have the same,
similar risk in it that they wouldn't sell you the
thing that's more expensive. That's one way
a fiduciary has to comply. Another way for
us is that we have to do what is best for an investor
and so we believe that market timing in all it’s forms is destructive
behavior. We have what's called an Investment
Policy Statement and it's inside every application
for every client. It tells them that we do not do any of
the common investing pitfalls and we will never
do them, and we have to do what's best. We only win if
you win. So we're looking at you winning
long-term not just in the short term. Of course if
the markets are going down and you know our fee is
tied to that return we would want to stop the bleeding
as well, but unfortunately if we look at long-term
that's not what's best for the investor and so therefore
we would not engage in that activity. As a fiduciary
we will always act in the best interest of the client
based on their risk tolerance, their goals and their
needs for the future. We encourage you to continue
watching our series on the Common Investing Pitfalls,
and feel free to visit our website. If you have
any questions I encourage you to register for our
upcoming Investor Breakthrough sessions and we’d
be happy to answer any questions, just reach out to us.
