Dec 2nd, 2021 | Money Podcast

STOCK MARKET TURMOIL what do we do about it?



Submitted by matt120 on

A good solid show Tom. As always, your advice is spot on. If I could add a few things. When I retired, I had to diversify my portfolio. It's hard to give up those high gains we get when we are aggressively invested while working. With the help of a financial advisor (fee based of course) I have smoothed out the ups and downs, while still getting solid returns.

I'm not sure how you would feel about it, but in my opinion, a younger person still working, and investing could take 10 percent of their portfolio and buy the Tesla's, Gamestop, Crypto's if they feel like they have to. It might not be the best long-term investment, but if it allows the other 90 percent to keep working as it should, they could do worse.

Finally, you alluded to it on this show, but doing the right thing is not sexy, it's not fun, but it's how you get ahead.

Thanks for letting me share.

Submitted by conwy on

Tom's advice and philosophy is always good to hear and be reminded of.

I've been thinking a lot about my portfolio and reading + listening to podcasts including this one to try and inform that.

What I've personally arrived at is the following, which I call my "pragmatic" portfolio.

• 75% stocks, 20% cash, 5% bonds/fixed income

Within stocks:
• 82% passive/index, 18% active
• 20% small cap, 80% market cap
• 55% developed, 35% home country, 10% emerging

• No regrets about holding so much cash. Cash gives me tremendous safety, flexibility and freedom in life with practically no nominal downside risk. Inflation doesn't undermine this, because I can usually modify some aspect(s) of my life to work around inflation. Cash buys time in a way that an overheated stock market cannot. Also cash can be easily and tax-efficiently deployed as new investment vehicles and opportunities become available (perfect example: the new small cap value funds from Avantis)
• International diversification can help keep cashflows more steady during downturns
• Small cap value tilting is very solid bet with strong academic support, historical support and intuitive common-sense. And this is a good time to be holding them given the overpricing of big growth stocks.
• Emerging markets small cap value is a once-in-a-lifetime opportunity in terms of low costs and growth potential. With the changing global alliance structure, I can definitely see some emerging economies transitioning to developed markets and realising profits in the process, especially south-east Asia and some parts of Africa.
• No crypto as yet. I'm broadly bullish on Ethereum and related assets, but given competition and regulation, I don't see any reason to believe they will vastly outpace the regular markets. Also markets can capture that innovation anyway; plenty of regular listed companies are benefitting from crypto and reflecting that benefit in their expected returns.

Frugality, flexibility, marketable skills, healthy lifestyle and lack of commitments are also tremendous advantages, financially speaking.