0:00

Today's episode is sponsored by Raisin

0:02

UK, the free, easy to use

0:04

online savings platform. Welcome

0:09

to Many Happy Returns, where we aim to

0:11

make you a better investor. I'm Robin. And

0:14

I'm Michael. With 24-7 news,

0:16

it's easy to get caught up in

0:18

the fear of market crashes. Sensationalist

0:21

headlines often lead to poor

0:23

investment decisions, leaving many investors

0:25

worrying about things that have

0:27

little impact on long-term returns.

0:30

I want to know where we should really focus our

0:32

attention. And in today's dumb question

0:34

of the week, should you invest if you're

0:36

very nervous? All

0:40

right, let's get into it. So yesterday, Robin,

0:43

you sent me a message. You said, Michael,

0:45

we need to talk about doom porn. And

0:48

I thought two things. Firstly, I

0:50

was intrigued. Secondly, no one

0:52

has ever been more relieved to see

0:54

the word doom than me. Why

0:57

doom? Well, if doom wasn't in

1:00

your sentence, I would have a lot of

1:02

questions. But

1:06

look, everyone's seen the content where

1:08

people say, oh, there's a market

1:10

crash. And every week they have

1:12

this thumbnail on YouTube of something

1:14

on fire. And it's

1:16

just crisis after crisis, according to these people,

1:18

when the real world is just not like

1:20

that. Most of the time, everything's OK. Have

1:24

you not been accused of making doom porn

1:26

once in the past? I seem to remember

1:28

someone, including your picture, in a compilation of

1:31

sensationalist YouTube videos. Oh,

1:34

that's right. They did. I was quite upset by

1:36

that. Because if anything, you know, I go the

1:38

other way. People think I'm a

1:40

little bit too phlegmatic when it

1:42

comes to risk. But I don't think that's

1:44

true either. But look, most

1:46

of the time, things are fine.

1:49

This podcast should be renamed many

1:52

catastrophic returns. You know, then we'd get

1:54

more more subscribers, wouldn't we? I

1:56

mean, I'm up for it. I'll

1:58

sell out any excuse. I

2:01

mean, I think obviously that's the way the news works, isn't

2:03

it? If it bleeds, it leads. And

2:05

in investment terms, a big crash is the thing

2:07

that's going to draw people's attention. But

2:09

I guess the bigger issue here is that if you

2:12

pay too much attention to something like this, it

2:14

could make you behave in the wrong way.

2:17

Yeah. And with investment, there's an

2:19

objective measure of whether you've acted

2:21

correctly, which is your return. And

2:23

if you follow the wrong people

2:26

and believe the wrong things, the

2:28

way you're rewarded is by losing money.

2:31

So I think conspiracy theories are kind of interesting

2:33

and fun unless they lead

2:35

to chronic underperformance, which they probably

2:38

would. So while political

2:40

beliefs don't have any kind of

2:42

immediate punishment, I think incorrect

2:44

beliefs about markets clearly

2:47

will make you suffer. And

2:49

are you thinking it's because people will either have

2:51

a fear of investing and not put money

2:53

in the market, or they will

2:55

sell prematurely because they think there's a crash

2:57

coming or we're in a crash and they think it's going

2:59

to get much worse? Yeah. I mean,

3:02

I love Bach. And one of the

3:04

pieces he wrote, well, sweeter pieces, is

3:06

called the well-tempered clavier. And I

3:09

think in this case, it's

3:11

all about the well-tempered risk appetite,

3:14

not taking too much risk and not

3:16

taking too little, because that can be

3:19

just as bad. And

3:21

I think the point with market crashes is that

3:23

they are inevitable. There will be market crashes.

3:26

There has been throughout the history of the

3:28

stock market. And you need to

3:30

understand that before you buy stocks and expect them.

3:32

We can't time these things. So

3:35

broadly speaking, you have to be able to hold

3:37

your nerve through them. Yeah. I

3:39

mean, anyone who's been in the markets for

3:41

any length of time will have suffered through

3:43

one of these crises and

3:45

behaved well or behaved badly. But

3:48

I think what really marks out good investors

3:50

are the people who learned from the previous

3:52

crises and adjust their

3:54

behaviour accordingly. Maybe not too

3:56

much, because you can also take the wrong lessons

3:58

from a crisis. It can make

4:01

you cautious, overly cautious in

4:03

the period that follows the crisis. So

4:05

really it's about learning from experience,

4:07

being flexible, but also

4:09

having a realistic appetite

4:12

for risk and understanding what

4:14

will happen. Because as

4:16

you say, there will be a crash at some point and

4:19

you can mitigate it. You know,

4:21

allocation helps and your behavior certainly

4:23

helps, but there's no way of

4:26

avoiding this kind of risk altogether. I

4:28

mean, could I get all arty farty and

4:30

say that a stoic approach might help when

4:32

it comes to investing some kind of stoicism

4:34

where there are two buckets of things. There

4:37

are things that you have control over and they

4:40

are maybe worth worrying about and adjusting and

4:42

there are things which you have no control over

4:44

and which are not worth your time worrying about.

4:46

And market crashes definitely fall into that second bucket.

4:48

You can't control them. You can't time them no

4:51

matter what the gurus are telling you. Well,

4:53

look, if I'm allowed to talk about science fiction,

4:56

I think you're allowed to talk about stoicism. But

4:58

I think it's a good philosophy and a great one

5:00

for investors. Focus on what you

5:03

can control. Because I'd say there

5:05

are other things that investors also worry about

5:07

other than market crashes, which are also a

5:10

bit of a waste of time. So

5:12

one is obviously trying to beat the

5:14

market. So much thought goes into

5:16

this from people with

5:18

no informational advantage or educational

5:21

advantage or capital advantage. But

5:23

there's that instinct to try and beat the market. Yeah,

5:26

I often see that. And I often think

5:29

you probably don't need to beat the market

5:31

because it's often people who've got an excess

5:33

of savings anyway, or who've

5:35

been so scrupulous about saving their

5:37

entire life that they've got enough

5:39

savings to live off. So they're

5:42

still pretty hung up on beating the

5:44

market, you know, choosing active

5:46

funds or maybe having a tilt

5:48

in their portfolio or choosing single

5:50

stocks. And really, they don't need to

5:52

do any of those things. And

5:54

chasing yield, especially in that era where interest

5:56

rates are on the floor. I think a

5:58

lot of people reach. rebalancing

10:00

because it's effectively more frequent trading.

10:03

Yeah, lots of trading, lots of churn,

10:05

lots of money for the brokers. But

10:08

as long as you stick to things which

10:10

are fairly liquid, it's not a problem. You

10:12

know, if it's liquid stocks, then rebalancing frequently

10:14

isn't such a pain. But

10:16

the stocks I chose also were in liquid. So

10:18

it was a double whammy. And

10:20

in terms of people's portfolios, when

10:22

it comes to filling those buckets, so what

10:25

fund goes in your bond bucket, what fund

10:27

goes in your stocks bucket? Again, people get

10:29

so hung up on the tiny differences between,

10:33

let's say, as Global Stock Index Fund, when

10:35

they're going to give you very,

10:37

very similar returns for the

10:39

most part. And people don't believe me

10:41

unless I actually show them the graphs, because

10:45

there is just one world, although there are

10:47

various indices which track it. But

10:49

there's so little to discriminate between them.

10:52

And yet, as you say, people just spend

10:55

a lot of time worrying about it. When

10:57

in fact, any of them will do. There

11:00

are things worth worrying about. Fees

11:02

is the big one here. If you're going

11:04

to choose between similar funds, a 0.1% fee

11:07

is hugely better than a 1% fee. If

11:11

you've got a differential of that

11:13

size, over time, your returns will

11:15

be massively different. Yeah,

11:17

there are still funds out there where

11:19

they're just tracking the same thing as

11:21

many other funds, but for a much

11:23

higher fee. So being aware of what

11:25

returns you're getting is important,

11:28

and realising that you can get the

11:30

same returns and risk for a much

11:33

lower fee is very important.

11:35

So I think that's a big step

11:37

forward in someone's understanding of investing. What

11:40

is it that generates these returns? Can I

11:42

buy that risk and return

11:44

more cheaply? And in many

11:46

cases nowadays, the answer is yes. So

11:49

fees is definitely going into the bucket

11:51

of things I can control and things

11:53

worth worrying about. Definitely.

11:56

The other thing I would put in that happy

11:58

bucket of worry. is diversification.

12:02

That's something I think that it is worth

12:04

focusing on. It's not the

12:06

case that all markets are created equal. Some

12:09

will fail probably over your investing

12:11

lifetime because the country fails,

12:14

or at least capitalism within the country fails.

12:17

So you do want to avoid too much

12:19

concentration. Yes, if you possibly

12:21

can avoid concentration, it's not a bad idea

12:23

to do so. Although everyone

12:25

at the moment is concentrated in the US,

12:28

but that's been the situation for a long

12:30

time. So I think that one's not so

12:32

bad. If the markets

12:34

have been 60% in the US for

12:36

a century, then nothing necessarily

12:38

bad is going to happen immediately. But

12:42

if you're concentrated in China, well,

12:44

that could go either way. Yeah,

12:46

I say diversification is worth worrying about because

12:48

one, it's in our control, which

12:51

funds we choose and what our asset allocation

12:53

is. And it does make

12:55

a meaningful difference to your return over the long term

12:58

and your volatility. And

13:00

the other thing is sometimes people get

13:02

really obsessed with exactly how they get

13:04

exposure to different assets. For

13:06

example, should I buy a gold bar and

13:08

bury it in my garden? Should I put it in

13:10

the bank? Should I buy paper

13:12

gold in air quotes? Does it

13:15

matter? And again, if I hear the

13:17

phrase paper gold, that immediately tells

13:19

me which kind of channel someone's been

13:21

watching on YouTube. These are

13:23

kind of gold maximalists who believe that

13:26

if you have a fund which tracks

13:28

gold, well, if suddenly

13:30

paper money becomes worthless, then

13:33

that paper gold will also be worthless.

13:36

Why don't people say paper stocks or

13:38

paper bonds? Everything is paper, right? That's

13:41

an investment. All digital, yeah.

13:43

Paper oil. No one's storing

13:45

oil in their back garden, are they? So

13:49

I think that's another thing which is

13:51

not really worth worrying about because the

13:53

kind of environment in which that paper

13:55

token would be useless or the digital

13:57

token would be useless of your ownership.

16:00

funeral please. I

16:02

said to Laura do you think if I died tomorrow anyone

16:05

would come to my funeral and she said only

16:07

if I invited people. I'd come

16:09

and livestream on your channel like a memorial

16:14

and in the same vein of catastrophic

16:17

personal risk the other thing that

16:19

is worth worrying about is scams which

16:21

are getting ever more complex and ever more

16:24

convincing and it's a big mistake

16:26

to think that you'll never fall victim to them.

16:28

They can really catch anyone out There

16:30

are some good rules of thumb if someone contacts you

16:32

out of the blue then it's

16:34

probably a scam in fact almost certainly and

16:38

I've had people talk to me via WhatsApp

16:40

and say look is this you that's just

16:42

contacted me and I've had

16:44

to double check and say look you know

16:46

I don't contact people out of the

16:48

blue on WhatsApp so no it's not me and

16:51

that's quite scary because you realize that someone is

16:53

pretending to be you but thank

16:55

goodness that person checked so I

16:57

think having those really simple checks

16:59

to make sure that the person

17:01

contacting you is genuine is

17:04

probably time well spent and

17:06

it doesn't require a huge amount of effort. If

17:09

you're ever in doubt of whether you're actually talking to

17:11

the real Roman what should they ask

17:13

you some sort of sci-fi question? Obscure

17:16

thing from Star Trek in the

17:18

70s? Asimov would probably

17:20

be a better choice It raises an interesting

17:23

point though which is that I

17:25

think one of the big impacts of artificial intelligence

17:27

in the short term could be how

17:29

convincing these scams become. Have you seen

17:31

these examples where they clone people's voice

17:33

and now even clone people's face talking

17:35

in a very very plausible way and

17:37

it's only gonna get better from here

17:39

and especially if you're somewhat

17:41

of a public figure like maybe me and

17:43

you are now Roman with all our voice

17:45

all over this podcast it's worth thinking of

17:48

ways to mitigate that risk so for example

17:50

my wife and I have a code word

17:52

and if we're ever on the phone to

17:54

each other I'm serious here Roman you're laughing

17:56

but I'm serious if we're ever on the

17:58

phone to each other about something financially we

18:01

say, what's the code word before we

18:03

talk about it? That's amazing. Especially

18:05

if it's around moving money or something like that. It's

18:08

funny you say that because a person that was just

18:10

checking that it was me talking to them, I

18:12

said to them, look, listen to my voice if we speak

18:14

on the phone and you'll be able to tell it's me.

18:16

And then Laura said, no, they can clone

18:18

your voice with AI. There

18:20

was a case of a lawyer who testified to

18:23

Congress in the US and he

18:25

received a call out of the blue from his

18:27

son in tears saying,

18:29

oh, I've been in a car accident. I've

18:31

injured a pregnant woman. It's terrible.

18:33

I've been arrested. You need to pay bail. Then

18:36

immediately after he got a call from

18:39

the bail office, very plausible saying, you

18:41

need to pay it. Here's the amount. This is where you

18:43

need to send it. And he almost

18:45

did it except for the fact that he'd

18:47

rung his son's work. In the

18:49

meantime, to say, my son's not going to be into

18:51

that. He's been in a car accident. And

18:54

obviously they got in touch with the son and the son

18:56

rung him said, this is not me. And he can't believe

18:58

it. Like it was completely convincing.

19:01

That's shocking, isn't it? Especially your own son

19:03

whose voice you'd know inside out. But

19:06

it sounds like science fiction, but we're

19:08

basically there now. So it

19:10

is worth a little bit of thought. And I think, like you

19:13

said, it doesn't take a huge amount

19:15

of effort to put in a simple defense

19:17

mechanism such as having a code word, which

19:19

you keep secret, never write down, never tell

19:21

anyone. And also there's

19:23

a kind of plausibility thing. Always think,

19:25

well, does this make sense? Or if

19:27

someone's offering you something with crazy returns,

19:30

it's probably a fake. It's not going to be

19:33

real. And never give in to

19:35

time pressure. There is never

19:37

time pressure when it comes to investments.

19:40

If you think I've got to make this

19:42

investment today or move money literally now, or

19:44

it's going to be, you know, siphoned off

19:47

to some other bank account, it's

19:49

a scam. But and even if it

19:51

isn't, who cares if the investment is gone by tomorrow,

19:53

right? There's plenty of other investments that are going to

19:55

come up. It probably wouldn't pan

19:57

out anyway. If it's one of these short

19:59

term things. then it's probably 50-50 whether it

20:01

would have worked anyway. So

20:03

yeah, never feel rushed, I think. This

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to raisin.co.uk slash pensioncraft. So

20:41

talking about things which really

20:43

aren't worth worrying about, I

20:45

think comparing yourself to neighbours,

20:47

peers, celebrities, all of

20:49

these things are probably a

20:51

bad idea. People do

20:53

it though. But you see

20:55

these influencers with hired Lamborghinis and you're

20:57

just thinking the reason why they're doing

21:00

this is to say, look, you could

21:02

be like me, I've got more than

21:04

you. And so by copying

21:06

me, I can sort of lift you up

21:08

when in fact it's unlikely that

21:11

that's going to be the outcome. No

21:13

one got rich buying Lamborghinis and that's

21:15

the extreme end of what everyone seems

21:18

to be doing, right? They've hired a

21:20

Lamborghini on finance or whatever and people

21:22

are buying their fancy cars generally on

21:24

finance, often on bad terms and

21:27

thinking, well, I need a fancy car too

21:29

because I see them parked around in my

21:31

neighbourhood is probably not a good way to

21:33

go. If your goal is

21:36

to maximise your wealth and I don't know, retire early or

21:38

whatever it might be. And I

21:40

think some social media are particularly

21:42

rife with people pretending to live

21:44

a lifestyle which they don't. Instagram

21:47

is the one people usually mention where

21:50

they've got perfect teeth, the perfect lifestyle.

21:52

I do yoga in the mornings, I

21:55

have a meditation session and

21:57

people just think, oh, I wish I could

21:59

aspire to a life like that when my

22:01

life is really scrappy and I don't have

22:03

time to meditate. I'm just struggling to get

22:06

through the day. I've started doing

22:08

yoga in the morning. So I've been

22:11

on Instagram too much. I also

22:13

went through a period of doing those cold

22:15

showers that everyone was banging on around. Whole

22:17

yoga sounded good, but it wasn't what I

22:19

thought. What were you expecting? I can't

22:22

discuss it. Did you get turfed out? The

22:26

bouncers carried you out. I

22:30

can't do that one. But to

22:33

go back to the point, comparing yourself to

22:35

other people's sort of material possessions or the

22:38

external appearance of their lifestyle is probably

22:40

not the way to go. Like it's

22:43

often not going to match what their

22:45

real balance sheet is underneath. But

22:47

to go back to your point about yoga, there

22:50

are things that are worth worrying about, such

22:53

as living a healthy lifestyle. The

22:55

whole point of investing is we're saving and

22:57

investing money to enjoy it later on. You

22:59

want to be around to enjoy it. People

23:01

usually laugh if I say this to them and

23:03

I say, look, stay healthy, because

23:06

then you'll get to enjoy your money. Because

23:08

there's very little point in having that pension

23:10

if once you retire, you're not

23:12

well enough to really enjoy that time. We

23:15

recently did an explainer which was quite shocking.

23:17

I think many people find this shocking, which

23:20

is instead of looking at

23:22

expected lifespan, which is about

23:24

86 if you're a male in

23:26

the UK of roughly my age, but

23:29

if instead you look at

23:31

expected healthy lifetime, where

23:33

it's the amount of time until

23:35

you start to develop a serious

23:37

chronic condition, which is mid-60s.

23:41

So that's pretty shocking for many people

23:43

because there's not much time between retirement

23:45

age and the point at

23:47

which you start being unhealthy. And

23:50

if you are able to extend your lifespan, it

23:52

can have big financial rewards. And maybe

23:54

we can all take a bit of inspiration

23:56

from the oldest person to ever live, or

23:58

at least the oldest person to ever live.

24:00

person whose age has ever been verified. And

24:02

this is a French woman called Jean Calment,

24:06

who was born in 1875 and died in 1997. Now not only did she

24:09

live a very long

24:14

life, but she financially

24:16

profited from it in a most extraordinary

24:18

way. So in 1965 when

24:21

she was aged 90 and had

24:23

no heirs, this woman

24:25

signed a life estate contract on

24:27

her apartment with a civil law

24:30

notary called André-Francois-Rafrée. And in

24:32

exchange for selling him the property, she was

24:35

granted a right of occupancy for the rest

24:37

of her life and a monthly revenue of

24:39

two and a half thousand francs. Now

24:42

you might think this lawyer has made a great

24:44

deal because you know she's 90, only gonna live

24:46

what, another couple of years if she's lucky. Then

24:49

he's got the apartment, he's paid her a few

24:51

thousand francs, all is well. But

24:53

no, she lived on and on and on

24:55

until 1997 as we said. And in that

24:57

time she received

25:01

more than double the apartment's value from

25:03

him and his family had

25:05

to continue making payments after he died I

25:07

believe. And apparently she

25:09

said that in life one

25:12

sometimes makes bad deals. She

25:14

didn't include herself in that did she? Never

25:17

go short a stubborn French woman. But

25:19

look if you've got something like an annuity this

25:21

is your way of getting payback. Just

25:24

live a long time despite the insurance

25:26

company. An annuity is kind

25:28

of like an inverse life insurance policy right?

25:31

The longer you live the better. So

25:33

making decisions around life insurance and annuities you

25:35

can control that and mitigate risk.

25:38

What else do you think's in our control and worth

25:40

worrying about? One thing you can

25:42

certainly control is how much you save and

25:45

it's not always painless. You have

25:47

to sacrifice things today in

25:49

order to have consumption tomorrow. But

25:52

people always assume that investment is about getting

25:54

as huge a return as you can possibly

25:57

get. But in fact a lot

25:59

of the onus is on you. to put the

26:01

money in in the first place and to put

26:03

as much money in as early as possible as

26:05

you can. And that's

26:07

because sacrificing a little bit of consumption

26:09

today can buy a huge amount of

26:11

consumption 30-40 years in the

26:13

future once compounding has had its chance

26:16

to snowball your money. But

26:18

there's that life thing again. You've got to

26:20

live long enough for the compounding to work

26:22

really well. So, healthy lifestyle,

26:25

save as much as you can and then

26:27

live as long as you can. And

26:29

it helps if you can maximize your income along

26:31

the way in your working life. And

26:34

you do have some control over that. I

26:36

think people shouldn't kill themselves trying to get

26:38

a second job. All of

26:40

this stuff about side hustles can potentially

26:43

really break you as a person. But

26:45

there are certain things you can do to ensure that you

26:47

have a higher income. For example,

26:49

it took me a long time to notice

26:51

that people at the investment bank who were

26:53

closer to the clients, earned

26:55

exponentially more money. So

26:58

I thought, wait a minute, I think I probably need to

27:00

do that. So

27:02

that's what I did. And it really paid

27:04

off. But it took me a long time to work

27:06

it out. But you made it into the front

27:08

office. Indeed I did. Impressed

27:11

everybody. I frequently

27:13

sent on Bloomberg TV and built

27:16

an empire. And that's

27:18

what got me here today. But I

27:20

think one cultural difference between myself and

27:22

yourself, Michael, is that when I was

27:24

working for companies, I was always loath

27:27

to move jobs, because you were seen

27:29

as a drifter. But I think for

27:31

your generation, is it true that you

27:33

job hop more? I'd have

27:35

to look at the stats to verify that. But

27:37

I think there is an advantage when you're young

27:39

in your 20s to job hop

27:41

a bit. Because it seems to me that

27:44

typically the biggest pay rises you get are

27:46

when you move between companies rather than jump

27:48

up the ladder internally. But

27:50

again, you don't want to do it so frequently that you

27:52

never get your feet under the desk. and

28:00

education and that's certainly something

28:03

which can help you get pushed up the salary

28:05

scale isn't it if you do

28:07

pick up new skills. Yeah or

28:10

move to Dubai. I speak

28:14

to a lot of developers and they're always telling me

28:16

if I don't keep up to date with

28:18

it you know I'll just be defunct so

28:20

I have to keep up to date with

28:22

new languages new techniques and there's always some

28:24

new trend in development. And the

28:27

other thing not to forget is if you're

28:29

doing well and you're making your company money

28:32

ask for a pay rise. I think sometimes people are

28:34

too shy to ask for a pay rise. Do

28:37

it politely, have your reasons and

28:39

don't be disheartened if they say no. It's almost like asking

28:41

someone out on a date right you've got to be prepared

28:43

that they'll say no and then you know where you stand

28:45

and you can go and play

28:47

the market. I mean it's not necessarily

28:49

seen as a bad thing by your manager

28:52

anyway showing that you've got some initiative that

28:54

you're proud of your achievements and

28:56

maybe they haven't noticed all of the good

28:58

stuff you've done so it's worthwhile putting the

29:00

case I think you're right. But

29:02

whatever amount you earn the

29:05

most important number in

29:07

personal finance and investing

29:10

is your savings rate. How

29:12

much of your income are you saving and investing?

29:15

That's actually more important than how much

29:17

money you make. And

29:19

again you have control over how much you

29:21

spend so the savings rate can be pushed

29:24

up by spending less earning more and

29:26

maximizing the difference between those two numbers. So

29:28

I think you're right I think that's probably

29:30

the most important gauge of success

29:32

is how much you can set aside early

29:34

on. And I think for people

29:37

who are just getting started investing maybe

29:39

they've had a high savings rate for a while they've

29:41

built up a small nest egg 10

29:44

20 grand whatever and they're just

29:46

about to put into the market for the first time. I think

29:49

what a lot of people worry about is losing money

29:51

but in the short term they think I'm gonna put

29:53

in my 20 grand and then what if it's 18

29:56

grand in two months time or 15 grand which

29:59

could happen. leave the stocks. And

30:02

really, that is not the thing

30:04

to worry about. Yeah,

30:06

I mean, if it's a long time until you

30:08

need the money, who cares? It's probably going to

30:10

recover hugely over that period

30:12

of time, if you're not going to need it

30:14

for decades. Short term? Yeah,

30:17

it's going to fluctuate. The

30:19

thing which is going to hurt you the most is if you're out

30:21

of the market when you're young, because

30:23

I think there you've really got to save as

30:25

much as you can as soon as you can.

30:28

Ignore the volatility, just think

30:30

of that long term compounding.

30:33

Build up a good habit of saving

30:35

and living below your means, because that'll really

30:37

pay off later on. It

30:40

seems weird, doesn't it, to say don't worry

30:42

about losing money, especially when people like Warren

30:44

Buffett's golden rule of investing is never lose

30:46

money and stuff like that, which

30:48

is a bit of a strange sound bite. But if

30:50

you're investing for the long term, what you

30:52

achieve in the short term is kind of

30:54

irrelevant, even though it

30:57

feels scary when you first

30:59

get started. Now, if you do find

31:01

yourself really worrying about your investments, and all

31:03

of us do at some point, it's great

31:05

to be able to discuss this with other

31:07

people. And that's what you can do as

31:10

part of our community. If you want

31:12

to learn more about joining us,

31:14

then just go to our website,

31:16

pensioncraft.com/membership. Okay,

31:21

today's dumb question of the week is

31:24

should you invest if you're very

31:26

nervous? I think

31:28

the answer is yes, because if you

31:30

just have cash, that would just be

31:32

an investment of sorts. So

31:35

that would be a very nervous

31:38

person's investment, probably. So what

31:40

you're saying is that we're all investors by

31:42

default, you have to invest in something, cash

31:45

being one of those things. Yeah, whatever

31:47

it is, it's going to be invested in

31:49

something. But the real problem,

31:51

I think, is if people are too cautious,

31:53

and this often happens if they grew up

31:55

during a crisis period, they say that you

31:57

learn your risk appetite in a certain

32:00

certain kind of plastic period when you're

32:02

young. And if you live through

32:04

a crisis early on, you'll be too cautious for the

32:06

whole of your life. So these

32:08

poor people who grew up during the financial

32:10

crisis, oh, like you, Michael. Yeah.

32:14

Dotcom of financial crisis. But

32:16

some people are just very nervous about investment,

32:19

particularly about things like stocks. Now,

32:21

however, they came to be that way because

32:23

of living through a market crisis or because

32:25

of what their parents told them or

32:27

because of what they've heard in the media,

32:30

they are very nervous. And the danger of being very

32:32

nervous is you dip your toe in the water, mark

32:35

its plunge, and you sell. And

32:38

then you don't get the recovery. That's

32:41

an awful outcome for that person because not only

32:43

are they sold after a fall, but

32:46

then they don't participate in the upswing,

32:48

which almost inevitably happens. And

32:50

I think you do have to know yourself. And if you

32:52

are that person who is very nervous, there

32:54

are a few things that you can do to do things

32:56

that can maybe get you into markets in

32:58

a way that manages your fear. So

33:01

the first thing which we talk about all the time

33:03

is asset allocation. There are

33:05

ways to design a portfolio, which

33:08

includes things like cash and

33:10

government bonds, if you're comfortable with

33:12

them, alongside riskier assets, which

33:14

will reduce your volatility. And

33:17

you don't have to just jump in the

33:19

deep end, right? You can gradually drip your

33:21

way into the market. Now

33:24

we talked before about how that is not the most efficient way

33:26

to do it. You will underperform

33:28

in most scenarios by not going all

33:30

in at once, but it

33:32

does help manage that fear of a

33:34

crash. I guess to

33:36

a certain extent, you can also reprogram

33:39

yourself. If you're the kind of person

33:41

that can look up statistics and

33:44

use that to inform their behavior,

33:46

then just looking at the long-term returns

33:49

for various asset classes really helps. It

33:51

certainly helped me, and I

33:53

brought myself around to the idea of equity.

33:56

When I started off, I was very

33:58

cautious. So probably too cautious. But

34:01

you sort of felt your way into markets, right?

34:04

Even if that wasn't the plan originally, you

34:06

did kind of drip feed by default. Yeah,

34:08

I gradually built up my position and

34:11

I did drip feed for a long period of time. But

34:14

for me, overcoming my fear, the drip feeding was

34:17

the way I did it. So you've just got

34:19

to find what works for you and end

34:22

up with a portfolio that you're happy with. Now,

34:25

currently, I'm 100% equity in my core

34:27

portfolio. And people often say to me, do

34:29

you think that would be appropriate for me

34:31

or I'm not comfortable with 100% equity? But

34:35

I've never said that I think other people should

34:37

copy me because it's not

34:39

appropriate for most people. But

34:41

I would say that pretty much everyone

34:44

needs some stocks if you're an investor.

34:47

It's just a question of how much and what you balance

34:49

it with. Yeah, if you want

34:51

to beat inflation, that's just been the consistently

34:53

best way of doing it for a very

34:55

long period of time. If

34:57

you do have global equity, then

34:59

it'll probably work. It's not guaranteed,

35:02

but it's probably your best bet of

35:04

beating inflation. You know,

35:06

I think is harder than being a

35:09

nervous investor is being

35:11

married to a nervous investor if you're

35:13

not nervous yourself, because then you have

35:15

to sort of convince someone else about

35:19

probabilities and uncertain futures and

35:21

how we have to be

35:23

invested in something. It may as well be

35:25

something that returns a higher amount over the long

35:27

term. But then when the

35:29

market has its inevitable crash at some point, you

35:32

have to sort of take the blame, but

35:34

also be like, I told you this was going to happen.

35:36

We've got to just stick with it. The

35:39

solution I usually see is that they

35:41

either separate their portfolios. So

35:44

the nervous partner has a lower

35:46

risk portfolio, or they

35:48

just delegate everything to one of them and

35:50

simply trust. But of course, that

35:53

comes with blame. I think if

35:55

you're in a marriage or a very long term

35:57

relationship, having these two

35:59

separate portfolios... videos where you imagine

36:02

one is like, I don't know, 100% stocks and one

36:04

is very cautious, 100% cash. That

36:06

would be a terrible solution because if markets

36:09

do what markets do typically, in 30

36:13

years time, the person who's in stocks is going to

36:15

be really, really wealthy and the person who had cash

36:17

is not going to be wealthy. And

36:19

what you can do is one person going

36:21

on five star hotel holidays and one person's

36:23

going to butlins, like what? You see,

36:26

I told you. But

36:29

then the person who didn't take risk is going to expect

36:31

to be supported by the one who did.

36:35

This is a kind of reverse moral hazard. Yeah,

36:38

it is. Yeah, it's never that

36:40

extreme. So, you know, more equity, less

36:43

equity is usually the solution people end

36:45

up with or just

36:47

blindly trust your partner. I

36:49

don't do that. But

36:51

I guess at least if you have the same goals, you're

36:54

just arguing about the best way to reach them. What's

36:57

really hard is if you don't have the same goals. Thank

37:00

you for joining us for Many Happy Returns. Keep

37:03

sending us your questions, no

37:05

matter how dumb, at mhr.atpensioncraft.com.

37:08

And do remember to check out

37:10

pensioncraft.com for all the information about

37:12

our membership courses and investment coaching

37:14

options. Many Happy Returns

37:16

is a pension craft production co-hosted

37:19

and executive produced by Romy Nikiza

37:21

and Michael Pugh. This podcast

37:23

is for informational and entertainment purposes and

37:25

is not financial advice. We do not

37:28

provide recommendations or endorse any decision to

37:30

buy, sell or hold any security. We

37:32

cannot be held responsible for any actions listeners

37:35

may take and investors are encouraged to seek

37:37

independent financial advice.