Episode 42: Don’t Be Afraid of the Stock Market with JD Gardner
Segment 1 (Show Open):
Good afternoon, everyone! Welcome in. Welcome to Coasting in Retirement! Thank you for joining us today. We have another great show coming your way, we have a returning guest host, it’s JD Gardner of Aptus Capital Advisors and he’s back by popular demand, ready to do a deep dive on investing and the stock market. JD, how are you doing? For listeners that missed your last appearance on our radio show, please give a brief description of Aptus and your role there:
JD: Manufacter and launch ETFs, exchange traded funds,
Listeners: JD and I are here today to discuss financial topics relevant to those of you in or near retirement, living your best life along our part of the gulf coast. Here’s what we’ve got in store for you today: First segment – deep dive on our topic of the day. 2nd segment - at about 25 minutes past the hour - “News of the Week”. Then at roughly 45 minutes past the hour, stick around for our 3rd segment, we call it ” Josh’s Crystal Ball and Big Mouth”. Of course, this time will see if JD’s had any predictions of his own that either hit the bullseye or…maybe he would like a re-do on. So buckle up, we’ve got a lot to get to!
Quick background on me for those new to the show. Again, my name is Josh Null, I am a fee-based financial advisor, I hold my FINRA Series 65 securities license, and I am the owner of Gulf Coast Financial Advisors, we are an independent investment management and financial planning firm with offices in Fairhope, Orange Beach, and Mobile! You can find more information on me and Gulf Coast Financial Advisors by visiting our website gulfcoastfa.com, or feel free to give us a call at 251-327-2124. If you missed that contact info, do not worry, we will repeat our contact info several times throughout the show!
I’m also going to do a quick disclaimer to help the listeners understand the role of Aptus with Gulf Coast Financial Advisors. As I mentioned in the opening, JD Gardner is the CIO and Founder of Aptus Capital Advisors. JD also holds the esteemed credentials of CFA, which stands for Chartered Financial Analyst, and CMT, which stands for Chartered Market Technician. JD’s firm Aptus Capital Advisors serves as a Sub Advisor to my firm GCFA, which means that Aptus helps me with my client’s investment accounts, including portfolio construction and trading, among the many other services they provide. What it does NOT mean is that JD or Aptus is employed directly by, or for, GCFA. JD’s advisory services are offered through Aptus Capital Advisors, a Registered Investment Advisor registered with the Securities and Exchange Commission and based in Fairhope, Alabama. Aptus Capital Advisors and Gulf Coast Financial Advisors are not affiliated.
Alright, back to the show. As of this recording, the stock market is on a tear, apparently reacting very positively to the election of Donald Trump for president, with indexes like the S&P 500 posting all times highs recently. For many investors, this recent market run-up has provided quite a bit of reassurance with their portfolios, but for some, there’s a fear that they be missing out on these gains, some investors fear that the market is overvalued, some investors have fear of an ever-looming stock market correction, and finally, for some of you all listening, there’s just a general fear of the stock market itself. All of these issues – the a general sense that an investor can’t ever fully trust the stock market – is what we are going to tackle today.
So JD, with that said, again the stock market is doing very well and most if not all of the tracking indexes up, it feels good to most investors, but what does all this actually mean? Is it simply an emotional reaction to Trump’s election or are there more fundamental things at play here?
Equities are leading the charge for both this recent run-up and for 2024’s generally strong performance, what has that meant for those investors holding the classic 50/50 or 60/40 equity-to-fixed income portfolios?
What do you say about folks concerned about a market correction? Or that the market is “over-valued”?
How can investors best position themselves moving forward, in your opinion?
What do you say to folks that are afraid of investing in the stock market, especially to those that are heavily concentrated in fixed interest products like CDs and money market funds?
Listeners, now that we have your attention, let’s re-iterate the role that JD and his firm Aptus Capital Advisors serves with my firm Gulf Coast Financial Advisors. The technical definition is “sub-advisor”, but the important part for you all to remember is that all of my clients enjoy the incredible expertise and service that Aptus provides via portfolio management and investment advice. Josh – expand here.
If you would like to start the conversation with me and my team, simply call 251-327-2124, or you can reach us through our website gulfcoastfa.com. One our site, you can choose to send us a direct message, or you can click on the blue button in the upper right-hand corner to set up a 15-minute introductory phone call on my calendar.
Alright folks, coming up next - There’s always a lot going on in the world! Particularly the world of finance, investments and money. Every week we scour what Michelle calls the interwebs for financial articles related to our topic of the day, especially articles that pertain to those in or near retirement. So join us after the break to hear JD and I discuss this week’s relevant headlines in our “News of the Week” segment. Stay tuned!
Segment 2 - News of the Week:
Josh: “Welcome back to Coasting in Retirement, your host Josh Null here! As we discussed before the break, every week we scour the interwebs for helpful financial articles related to our topic of the day, especially articles that pertain to those of you in or near retirement. Our job is to help you all understand how these headlines impact you, especially when it comes to your money! Note – if you want to read our referenced articles yourself, we also include the links on our show transcript, which you can find on our website gulfcoastfa.com under the podcast tab. We upload our episodes every Monday after the show airs on Sunday. Without further ado, here’s the “News of the Week”
1. Josh: First up JD, a fresh off the press article from our friends at The Motley Fool. The headline reads “Billionaire Investor Warren Buffet Sold Apple Shares for a Fourth Straight Quarter. Should Investors Be Worried?”. So I would think that all of our listeners know who Warren Buffet is, he’s the head of Berkshire Hathaway, a large conglomerate, and is probably the world’s most famous value investor, but some of you may only loosely follow his investing track record, so let me provide some context as to why there’s concern around his recent selling activity. One of Buffet’s often repeated quotes stems from when he was asked what was his favorite holding period for stocks, he replied “forever”. So the fact that Berkshire Hathaway is selling some of their investments, particularly their Apple stock, and building up a huge cash position is taken as some investors as a sign that the stock market is overvalued. Fun note JD, with $325 billion of cash on hand, apparently Buffet could buy outright 476 of the 500 individual companies that make up the S&P 500. But more importantly, what do you think that Buffets actions signal, and what should investors takeaways be?
https://www.fool.com/investing/2024/11/14/warren-buffett-sold-apple-shares-for-a-fourth/
2. Josh: Our next article is from CNN Business and simply titled “Fixed Index Annuities” but before I discuss the details of the article, I want to provide some context to our listeners. The reason that I am bringing up an insurance product with JD, who typically does not deal with the insurance side of the financial services industry, is because often the sales processes of FIAs are often tied into using investor’s fear of the stock market as a reason to buy this product. Remember, FIA don’t invest directly into the stock market, they simply mirror an index or collection of indexes, and while they usually promise “no losses due to a 0% floor”, they also cap the investor’s participation in their corresponding index gains. Now, JD, while I sometimes deal with FIAs, I think it’s fair to say that I have been openly skeptical of them on this show, or to be specific, I have been skeptical of how FIAs are sold. Far too often someone walks in my office with a FIA contract and a false sense of what it is actually doing for them, particularly around the growth potential. What’s your thoughts when someone tries to position the growth potential of an FIA, or heck, any insurance product, versus investing directly into the stock market? (And maybe we discuss alternatives)
https://www.cnn.com/cnn-underscored/money/fixed-index-annuity
3. Josh: Alright JD, so our next article is from a source that I’ve actually never referenced on this show before, one, because I know it has a pay-wall and we try to avoid those for our listeners, and 2, I just don’t think our part of the Gulf Coast has a lot of NY Times readers, do you? Well, the NY Times just happened to have the exact kind of article I wanted to discuss on today’s show, so listeners, if you want to read this article but get stoned by NY Time’s pay wall, just go to this show’s transcript on our website and I’ll post it there, with proper author references. Anyway, the article is titled “When the Stock Market Drops, Stay Calm and Do Nothing” and there’s a particular reason I wanted to discuss it. The basic premise – don’t panic when the market drops, don’t sell when everyone else is – is something a lot of advisors tell their clients during market corrections, and for many investors that may be solid advice, but I think there’s more to the story. In fact, I would like to give you the floor to you JD to discuss how clients of my firm Gulf Coast Financial Advisors have the privilege Aptus servicing as the sub-advisor on their portfolio, how those clients can certainly listen to this article’s advice – that is, do nothing when the market drops – BUT those same clients may not realize that some of their actual holdings are positioned to take advantage of market dips – the brakes vs the engine analogy you often use.
https://www.nytimes.com/2024/08/05/business/stock-market-advice.html
NY Times article: Advice: When the Stock Market Drops, Stay Calm and Do Nothing
Think of what’s happening in the stock market as a kind of fire drill. As we all know from childhood, one of the primary rules is not to panic. And in this case, panicking would mean selling stocks when the market is falling.
You run drills to stay sharp, but we haven’t had much experience with the S&P 500 stock index falling by more than 3 percent in a single day. According to Howard Silverblatt of S&P Dow Jones Indices, the last time it happened was Sept. 13, 2022.
Given that it’s been a nearly two-year stretch, we can excuse ourselves for getting a bit sloppy. So many people got nervous and ran to check or trade investments Monday morning, and many of them had trouble logging into brokerage firm websites and apps including those of Charles Schwab, Fidelity and Vanguard.
But really, why sell at a moment like this? It’s not a rhetorical question, so let’s try to answer it.
Selling is smart if you know that the stock market is about to fall by a lot and stay down for a long time. Most people don’t know, however, and those who got it right in 2022 or 2020 or 2008 or 2000 or 1987 may not know the difference between the skill they think they have and the luck that probably helped them back then.
Many of the people who traded furiously on Monday are professional investors of various sorts — or the robots they programmed to automatically sell when this or that indicator flashes yellow or red. But here’s a dirty little secret about, say, hedge funds: All of their trading in reaction to world events doesn’t lead most of them to do better than sticking money in an index fund that tracks the stock market. Mutual fund managers don’t do much better.
If you need money soon that you have invested — say, for a down payment or college tuition — this is probably a scary moment, and selling might make sense. But if you are frightened, remember the feeling. Going forward, perhaps any money you might need quickly should not be in the stock market at all.
Much of the money you have in stocks is probably for retirement. Chances are, you won’t need it for many years or even decades.
While it would be a neat trick to move all of your money to cash when the market is falling and then buy stocks again when the stock market has bottomed out, the bottom is often the time when investors are most scared. Most people can’t call a stock market bottom in the first place, let alone get up enough courage to bet all of their cash on that call.
First, consider the early days of the pandemic, when stocks fell by more than a quarter in the space of a month or so. Who would have thought that within a year, market gains off the bottom of the market would wipe out those losses and then some? But that’s what happened.
Now, consider other future facts that remain elusive: We don’t know who will be the next president of the United States, or what kind of hurricane season it will be. Try, if at all possible, to revel in the wonders of an unpredictable world and consider the possibility that good news can happen and the markets can react accordingly, even if we can’t predict most of it.
Second, look at the performance of your investment portfolio over the last year or three or 10. Chances are, you’ve made a lot of money if you’ve invested regularly and then left things alone. Nice going! Try to think about those enormous gains and not any smaller paper losses from today’s drop.
Now, consider what would have happened if you’d sold all your stocks in 2020 when the pandemic was at its scariest. The S&P 500 has more than doubled since then.
Finally, and as ever, you are not the stock market. If you have, say, one-third of your savings in cash, bonds or real estate, your overall paper losses in your investment portfolio are less than whatever Monday’s stock market losses end up being. Cash, after all, did not melt down.
Moreover, you are the sum of many large parts, including home equity and future salary, not to mention the immeasurably high returns that come from friends and family and playing outside and taking in art.
Go fly a kite or wander among beautiful buildings and check in with the market again tomorrow.
4. Josh: Last article for today JD, actually it’s going to be a 2 pack that references related articles on both of our respective websites. Listeners, remember, you can access these article links by checking out our show transcript posted to my website the Monday after this show airs on Sunday, and we encourage you do so in order to get the full context of our referenced articles. Both articles I’m about to mention are related to the VIX, or Volatility Index, which is often referred to as Wall Street’s fear index. For the article on JD’s site, Aptus Capital Advisors, it’s titled “Utilizing Volatility Expectations to Guide Risk Taking”. On my site, Gulf Coast Financial Advisors, my article is titled “Understanding the VIX: Wall Street’s Fear Guage Explained”. I bring up both of these articles about the VIX for 2 reasons. One, I would like to give JD an opportunity to explain what the VIX is, how it works, and what role it plays in portfolio construction, then two, I want to discuss how using sophisticated methods like this when investing client’s money compares and contrasts to completely passive investing. Let’s start with the VIX, JD:
https://aptuscapitaladvisors.com/utilizing-volatility-expectations-to-guide-risk-taking/
https://gulfcoastfa.com/blog/understanding-the-vix-wall-streets-fear-gauge-explained
Josh: JD, great job discussing these headlines, I know I learned a lot and I’m sure our listeners did too. Listeners – once again, I hope you’re picking up what we’re setting down, that GCFA has an incredible team with great processes related to your financial planning and investment management needs. I encourage those of you that want to continue the conversation to pick up the phone and give us a call at 251-327-2124, or you can reach out to use via our contact page on our website gulfcoastfa.com.
Alright folks, coming up next: Josh’s Crystal Ball and Big Mouth. What have been some of my predictions? Have I been right? Was I ever wrong? How wrong? What’s JD had to say in the past or what does he have to say about the future? We talk about all of these things and poke a little fun at my big mouth, and maybe we get to pick on JD a little too. Stay tuned!
Segment 3 – Josh’s Crystal Ball and Big Mouth:
Welcome back! Your host Josh Null here, along side guest co-host JD Gardner. So, JD, I am opinionated, so are you, I have strong opinions at times, so do you, I would say a radio show host that isn’t probably wouldn’t be very interesting to listen to. And we are both paid in our respective professions to offer professional guidance and opinions to our clients, otherwise what use would we be? Sometimes I feel so strongly about something that I talk about it publicly, sometimes I’ll even make predictions, and while I feel I’m usually proved right because I tend to be skeptical of my own industry, there are times I swing and I miss. So listeners, want to hear where JD or I was right, or maybe, an example of when we missed the mark? Then let’s get at with Josh’s Crystal Ball and Big Mouth.
1. Josh: Alright JD, here’s a prediction we both made before this year’s presidential election began in full swing. We both felt that neither candidate, whether it was Trump, Biden, Kamala or heck, any Republican or Democrat for that matter, would make the federal deficit a campaign issue. We felt that way because it’s not a winning political issue. Now, I realize that
Well listeners, I hoped you enjoyed a peak behind the curtain on how JD and I form our opinions and predictions, and more importantly, that we’re willing to admit when we are wrong. Which isn’t very often, but still. Listeners, if you’ve liked what you’ve heard today, or maybe you just want to have a conversation, we invite you one last time to reach out to us. Call us anytime at 251-327-2124 to make an appointment or shoot us a message our website at gulfcoastfa.com. Remember, you can always put a 15-minute conversation on my calendar, just click the blue link in the upper right corner.
Folks, that is a wrap for this week on Coasting in Retirement! I want to give a huge thank you to my guest co-host, JD, a thank you to our awesome radio station FM Talk 106.5, a thank you to our awesome show producer, Payton Null, many thanks to the provider of our show music, local band Sloth Racer, and as always my sincere appreciation for all of your out there that have been listening and joining us on this journey. We would love to be a part of your journey as well. Until we talk again next Sunday, have a wonderful and productive week. This has been Coasting in Retirement with Josh Null!
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