Do You Have An Emotionally Damaged Portfolio?, Ep #79

Hey, what's up! Welcome to episode 79 of Payne Points of Wealth! Markets are going crazy! They’re going up, they're going down, they're going sideways! There has been a lot of volatility going nowhere fast as interest rates continue to climb higher. On top of that, we've got two-thirds of economists talking about a potential recession. We're going to tell you what we think about a recession and what we think the economy is going to do over the next 12 months. On the Tipping Point, we'll talk about investing with your emotions. Are your emotions are holding you back from making good investment decisions? Listen now to hear our advice on how to fix that!

 

You will want to hear this episode if you are interested in...

• Are things worse than they’ve ever been? [1:19]
• One thing we see lacking in portfolios [5:20]
• The combination you want for a healthy economy [7:56]
• The Tipping Point [10:17]
• The biggest overweighting culprit [13:13]
•  When it’s appropriate to factor in emotions [15:42]
• Hidden Facts of Finance [18:45]

Do you have a pro-inflation portfolio?

One thing we see lacking more than anything else when we look at portfolios right now is that most of them don't have what we would call a pro-inflation portfolio. There aren't enough inflation hedges in the portfolio. There are too many assets that are reliant on low-interest rates and low inflation. We're probably not going back to less than 2% inflation like we saw the last decade and interest rates aren't going back to under 1% anytime soon. It's like just not happening. 

A lot of investors still want to hold onto what did well in the last 10 years. They're still on that growth trade. They still want to own all those large mega-cap stocks like Amazon, Google, Facebook, and Apple. Those stocks could go up, it's possible, but if we learned any lesson from the great tech bubble back in the late 90s’-00s’ it’s that a lot of these big companies like Microsoft can have a whole decade where the revenue continues to go up, the company does well, but the stock does nothing. That's one of the risks you have with a lot of these hot names. It's not that they get crushed. It's just that they don't do anything. 

This week on the tipping point: Bad emotional decisions

There are two huge emotions in investing. Fear and greed! Any decision made on either one of them has always historically been wrong. When it comes to making decisions about investments, it's extremely emotional. 

A lot of times when you make decisions, you think you're being logical but you're actually being emotional. When you act emotionally you end up making bad decisions about how to allocate your capital. So in this episode, we talk about some of the bad emotional decisions we can make and how to protect ourselves from...well...ourselves. Removing emotion will help you make good, pragmatic, long-term decisions to create wealth over time and reach financial independence. Go listen now to see if maybe you are allowing emotions to damage your portfolio, and what to do if you are!

This week’s hidden facts of finance

• From 2000 to 2010 emerging markets appreciated more than 16% a year. Whereas commodities returned about 6% a year and the NASDAQ only returned 1.6% a year. Fast forward from 2010 to now, the NASDAQ has returned 17% a year and emerging markets have only returned 3% a year, and commodities -0.15% a year. How times change!
• Archeologists discovered prehistoric human remains, ceremonial artifacts, and possibly the footprint of an ancient dwelling on the site of a planned 75 story residential condo tower in Miami. Talk about holding back project deadlines!
• 55 years ago, the photo session for the Beetles. Sgt Pepper's album cover took place. It cost nearly 3000 pounds, which was a huge sum at the time when album covers typically cost around 50 pounds.
• Over the long term, history shows the stock market has returned about twice as much as residential real estate. The S&P 500 returned, 12.47% annually from 1972 to 2021 vs only 5.41% for residential housing.

Resources & People Mentioned

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