00:00 Speaker A

So let’s talk big picture and discuss how investors should react during times of uncertainty.

00:08 Speaker A

Joining me now is Lawrence Sprung, Mitlin Financial founder and author of Financial Planning Made Personal for this week’s FA Corner brought to you by Capital Group.

00:16 Speaker A

Larry, what a stressful time in the markets, right? I mean we have seen this selling pressure, but we’ve also seen this sort of unrelenting news flow this year. And so I’m sure you’re getting a lot of calls from people who are freaked out and trying to figure out what to do amidst this backdrop, right?

00:32 Larry

Yeah, I think what you’re seeing is to to your point, volatility is because of uncertainty typically and we’re seeing a lot of uncertainty, right? We had uncertainty around who was going to be the new Fed chair. We’ve had uncertainty around AI and tech spending. So that increases volatility. I think in terms of long-term plans and projections, those remain on target. If you’re a little bit more of a trader, then you have to be able to digest these uh pieces of information as they come.

00:58 Speaker A

And and when we look at the things that we maybe do think we know this year, I mean, we we know, we think we know there are going to be some rate cuts. The number, you know, you can debate, right? You think you know the economy is sort of on a little bit delicate footing, especially the job market. So how do you sort of take some of that stuff and form a strategy with it?

01:18 Larry

Yeah, so I mean, I I think we’re in alignment. We’re thinking there’s going to be rate cuts, maybe one, maybe two, who knows, that’s out of our control. I I don’t know that the job market is softening as much as uh we’re hearing and expect, you know, experiencing in the headlines. Uh, but I I think there are certain areas that are definitely softening. You know, I I think when you look at the long-term effects or even the short-term effects of any of this on the markets, we have to see what the impact is going to be and what the projections are, right?

01:46 Larry

And what I mean by that is it it’s not we’re not heading, I don’t believe we’re heading towards a recession, which if you look at some of this data, that’s what, if you follow the breadcrumbs, that’s what it’s kind of leading us to believe. But I don’t think we’re there. Consumer spending is still pretty strong, sentiment is a little bit down, but I think as a whole, I think the economy is positioned pretty well and I think what we’re seeing is a little bit of a pullback off of those COVID highs that we saw just a few years ago.

02:08 Speaker A

Okay. And then, you know, I imagine some of the people who are calling you as all of this is going on and as they’re worried, want to lighten positions, right? I mean, or or or what do you like what are you hearing from clients and what do you tell them?

02:22 Larry

Ironically enough, we’re not getting a lot of calls because we position a lot of our families for more long-term perspective. Most of them don’t have short-term really perspective. So what we’ve done is designed a long-term game plan for them and have already bucketed out their money for their short-term needs, medium and long-term. So where this volatility is really affecting them is more in that long-term. So they have the time horizon to really withstand this volatility.

02:46 Larry

Their short-term bucket, which is really funding their needs and wants today and for the next 12 to 18 months, is fairly liquid and available and not at the risk of the market, so to speak. So those calls are not necessarily coming in and we’re not making fundamental changes. We are making minor tweaks to their portfolios because we definitely feel minor adjustments can lead to major improvements, but there’s not this holistic need to make overarching changes because of the strategies we’ve implemented.

03:06 Speaker A

And and I know, um, you you uh quoted a stat to me when we were talking about this that’s one that our friend Ryan Deatrick talks about a lot. I’ve seen it elsewhere as well that, you know, if you end up selling and you don’t participate over the long-term in the market, your returns are significantly worse over time.

03:22 Larry

Yeah, they’re they’re abysmal. I mean, if you look at it, most down and up days are clustered together. Since 2000, if you invested in just the S&P, you averaged 9.8% return. But if you just missed the 10 best days over that period, just 10 days, your return goes to a negative 12 and a half%.

03:41 Speaker A

And that’s on an annual basis, yeah.

03:41 Larry

Correct. Correct. So it has a wide swing and shows you the vast difference between staying fully invested and committed to your investment thesis versus trying to time things and going in and out. It’s it’s not that fruitful, especially most people are not professional traders that they can time that really effectively.

03:57 Speaker A

You mentioned minor tweaks. Like, how do you know where to make those tweaks? How do you think about when to do that in this kind of environment?

04:05 Larry

So we we rely heavily on our investment team and what their outlook is. So for example, one tweak that we’ve made recently is looking at portfolios three years ago, uh, we started taking a position our team in gold. Uh, now, we got a little bit lucky there and sometimes you’d rather be lucky than good.

04:22 Larry

But at this point, because of the huge runup that we’ve seen there, we are trimming those back a little bit. We are allocating a little more to international, you know, and peeling those because those have experienced, you know, explosive gains also. So it’s a matter of, you know, avoiding those instances where you want to let those gains run, but at the same time, you also have to take profits, otherwise you never do, right?

04:40 Speaker A

Right. And it’s interesting. I was going to ask you where you’re putting them. So it’s interesting that going into international is the is the area where you’re reallocating that capital.

04:49 Larry

Yeah, I mean international is an area that we feel in the next uh 12 months is going to be pretty uh fruitful for the markets, even if the US is a little bit softer. Uh, but again, we’re looking, you know, our team is evaluating this every day and we’re making adjustments quarterly to the portfolios. Now, it doesn’t change their overall thesis for the family, but underlying in those specific strategies we are making changes.

05:13 Speaker A

Gotcha. Larry, thanks so much. Good to see you. Appreciate it.

05:16 Speaker A

And that was FA Corner brought to you by Capital Group.