Join Scott Bennett & Sam Swift as they reflect on this last year. Sam shares openly how even he had a moment of doubt in 2020, and how he was able to get his mind back on course and look at the data to ease the anxiety many of us were experiencing. Ultimately proving once again that staying the course serves the patient people well.
Join Scott Bennett & Sam Swift as they reflect on this last year. Sam shares openly how even he had a moment of doubt in 2020, and how he was able to get his mind back on course and look at the data to ease the anxiety many of us were experiencing. Ultimately proving once again that staying the course serves the patient people well.
How's it going everyone. My name is Scott Bennett and thank you for tuning into this episode of the 3rd Decade podcast. Today, we're talking with Sam Swift, who's a chartered financial analyst or a CFA, he's also a CFP, is on the investment committee at TCI wealth and runs their retirement planning division, but probably his most important job without a doubt is as a financial advisor to my wife, Koni and I, uh, we have worked with Sam for quite some time, actually, even before I was in the industry. He's a, he's a reason I got into this field and talking with him and, and what he does and stuff. And he's somebody who I really respect and look up to in terms of all the research and things that he does, uh, in this space. So all the benefits of hiring an advisor and things like that, that we talk about when your life, uh, calls for one, or if it calls for one hold true for everyone. And even the best financial advisors in the world would tell you that they work with somebody who helps them manage their money as well, because the, the emotion always gonna be there, no matter what you're doing. And it was in, uh, the most recent call and, and meeting my wife and I had with Sam that he shared some insight and stuff on coronavirus and, and the markets and everything that's gone on in the past year. It'd been some time since we caught up and his role at TCI centers, a lot around working with his individual clients, but then also, you know, releasing a lot of really good blog posts and papers and stuff for all of TCIs clients to read and understand what's going on. So it was in that conversation we talked through and then thinking back to so many of the pieces and stuff that I've read of his over the past year, I thought this would be a really good insight for everyone within the 3rd Decade community. We talked about, you know, the, the difference between a young investor and how one might feel right now versus an older one. And, and so it was really an in a standard, uh, financial advising meeting that my wife and I had with Sam that I said, Hey, I, I would love if you came on and shared some of this insight with our participants as well. So 2020 was such a weird year. And although we're still dealing with a ton of the challenges surrounding COVID and, and it has been devastating, I thought it would make sense to kind of try and think about where we were this time last year, and what we were hearing now that we have a little bit of hindsight and the benefits that come with that. So I hope you all enjoy myself and Sam as we kind of look back at 2020, but then do a little bit of looking forward as well for what's to come Sam, thanks so much for coming on and talking with us a little bit.
Sam Swift:Absolutely.
Scott Bennett:You know, it's, it's really wild to think that it was just about a year ago, that the reality of, o f coronavirus was just kind of coming to light and coming out there. W e're, we're airing this episode on March 10th, meaning that tomorrow, u h, when this episode airs i s March 11th, which is, is the exact d ay that the NBA s hut d own, that was k ind o f my personal, oh man. Moment of like, this is real, this is happening. And, a nd I think at that point, we're all scrambling to get our personal lives. I k now, g oing grocery shopping and, a nd getting stuff together. And it felt very like what's next, you know, u h, I heard it compared to a Jack in the box today. I t was like, we're all waiting for something to pop up, but for you, you had to, you know, think about not only yourself and your family and getting all that stuff figured out, but then also, you know, in your, y our day job, t hat all the people at TCI Wealth, and at that point, the markets were starting to react pretty strongly to all this uncertainty. Can you reflect a little bit on, on how you were thinking about COVID a nd, a nd the markets specifically at that point?
Sam Swift:Yeah. Well, funny, I'm, I'll be similar to you and that it takes a, a sport to shut down. My world is really, really rocked as we're going there. I think I'd, you know, what I kept on my desk really to date, uh, was a ticket of me attending a U of a college basketball game with 12,000 other people on March 5th. Um, when you were just starting to hear really just starting to hear the term social distancing, uh, coming from there. So, you know, I, I consider myself somebody that, uh, that listens to science. It's what I do in my, in my day job. And it just, the information just wasn't really there unless you were really looking for it. And so it was that week after, um, I was actually my wife and I had plans to go to Las Vegas for the PAC 12 tournament and it was being shut down in the moment we had had, we had decided that week before that, uh, that didn't sound like a lot of fun at that point. So yeah, my, my individual life being upheld took a very much backseat because I, um, not only here at TCI, do I, am I responsible for our clients and their portfolios, but I'm very involved with the management. So a huge part of what we were dealing with as well was kind of an immediate, but he can come into the office. Um, so really caring for the employees as we, as we went through that as well. Fortunately, we had a nice, uh, group task force that jumped on that and was able to handle a lot of that part early. Um, I remember my really my low point, uh, post, the Rudy G ober and Tom Hanks d ay is what I've k inda remembered it as c uz c uz Hanks was a big one too. And w as that thought that if all these, if famous people have it, do we all have it< laugh> r ight. Kinda already as we went through that. Um, but about a week after that, we turns out one of my, uh, partners and he is written about it in our, in our newsletter was really one of the first diagnosed cases in Colorado. And it was because he, he very likely got it traveling back from Tucson when he had seen all of us, um, that the two weeks prior to that, and, and he had a pretty bad case as well as, as the early diagnosis where usually pretty bad cases, we weren't catch, uh, a lot of the asymptomatic cases. It turns out later or the more mild ones, um, as we went throughout. And so I had a major partner of mine, very important piece of the firm, uh, that we really just couldn't be in communication with. We had clients calling all over, um, you know, individual clients. Uh, one of which, which made a little more emotional plea for me is, is my in-laws as well as we kinda, uh, kinda went with that. And I, as I've told you before, Scott, it's a, uh, I don't get stressed often. And so if I am stressed, that usually means everybody else is feeling it. Um, and I think it's worth reflecting the, that I had my doubts. Um, it's important to know for context for me, uh, early in my career, uh, we had 2008, 2009. So that initial financial crisis, which, um, was very different in how it happened. Um, I would say both on the, on the positive and negative, hard to call any of that positive. Um, but in that there, there were some real structural issues. Uh, with that one in hindsight, you don't necessarily know it at the time and it was a much slower burn. Uh, it really happened over the course of a couple years, is these things usually do. And what the benefit of hindsight now, what happened last year at this time was we basically went through what a, what would normally be a two to four year of, uh, bear market and recovery. And we cramed it into about two months i f that, u h, as we went forward. And so my feeling always, a s we, as we went through that, as I doubted, I said, you know, if this is really awful and the world is shutting down, what do I do? Should I be selling? Should we be taking action? Should, s hould we be protecting client money, u m, in t his short t erm? And what I kept falling back on is I know what I know and what I know is the l ong t erm markets. There's no possible way for the way we invest that the world economy is going to zero and thus, thus companies are, it's going to be very painful. There's the added piece that people are worried for their personal safety, um, which was unique. That wasn't necessarily the case in'08,'09. People might have been, were very worried about their financial security, because they might have been losing jobs or, uh, you know, or, or seeing their home price drop in value at the same time, their retirement funds were dropping in value, but this was scary for other reasons. And to some degree, that was, I noticed it come through with a lot of clients that, that, uh, you know, finances were actually a secondary concern for a lot. I was pretty impressed with how they, with how a lot of them dealt with that. Nevertheless, you just had to fall back and say, even if I thought this was a different time,<laugh> that things were different. I had promised my clients that I'm going to not succumb and not react. React is often the worst thing we can do, uh, when we have a well laid out plan, uh, and, and stay course. And obviously in this case, it worked out, um, you know, it really, it worked out very well
Scott Bennett:To stay. Right, right. And it, and it's, so you said, you said at hindsight it's so much easier, but I'm sure as you're hearing from those clients and, and people are panicking, you're, you're panicking yourself. I mean, it's okay to be, be worried. I remember talking about it. Uh, and one of the first podcasts we released when COVID became a reality is, is the idea that, yep, this is a long term plan. What we're going through is short term, even even saying that at the time, I'm thinking, all right, three, four, maybe six months max that were, that were at this level of COVID and things being shut down and theory are a year later. Um, but one of, one of the things that's so Interesting to me, I think from, from your perspective is during this time you had, you were churning out a lot of stuff,<laugh> you were, you were kind of the, the main communicator and, you know, you run the investment committee and stuff like that at, at TCI. And so you were having to, that was your responsibility to communicate with clients, to communicate with people and understand it as best as possible yourself. So if you can, you know, think back a little bit to March of 2020, what were you reading? Was it, was it all the sky is falling? Like, it seemed like at the time. Um, and how did, how did the projections that the so-called experts have kind of play out now that we're here a year later?
Sam Swift:Sure. That's a, it's a tough question. So the first thing I always think about in communication in a time like that, uh, and really any, any time emotion has entered. And, and this was a case where emotion was rightfully entering for basically all of us to a T, um, is that you have to acknowledge that the facts and history and numbers rarely work in that, in that scenario to talk anybody out of reacting in a, in a poor manner. And so it becomes about acknowledging, you know, a little bit, a little bit to your point is like, I feel this too, that this is hard, but we are all long term stock investors. That doesn't mean we're all long term investors<laugh>, but for whatever portion we have in stock. And I know the audience that we're listening, you know, that is listening to this is very likely a long term investor, just for many reasons, more likely on the younger. So still have a lot of time ahead of them. Um, but we have a lot of retired clients, a lot of retirement clients that are in their seventies and eighties that will frequently tell me, um, you know, I don't have a long time<laugh> and I say, I know that's why most of your money is in fixed income, but you are still a long term stock investor. Right? So whatever portion is in stocks is, is long term. It's important to come back to what can we do about it today? Um, if we could do start with just, what can we do and then decide is that appropriate. And most of the answers that you come up to, to, um, what you frequently find is reacting to anything in the market is an effort to reduce your anxiety over what's happening. Almost always. Mm-hmm<affirmative> um, when we're having short term market movements, the problem with that is getting out does not reduce your anxiety because you have to make another decision it back in at some point. Yeah. Right.<laugh> so, um, what you were trying to solve, um, and what might feel good in the moment is actually not a solution to the underlying. And so once you can kind of acknowledge feelings and what people are feeling and very rightfully feeling in that, in that moment, um, is you kind of have to get them off of the emotional brain, and start, start talking about what is the prudent thing to do here. And, and that was pretty, I think that was pretty successful. Ultimately, and that's just born out in<laugh>. We hardly had any, certainly none of our clients or hardly any of our made a major change that wasn't, uh, that wasn't still in line with their longer term goals.
Scott Bennett:Yeah. And that it's so key, but at your point of, you know, either way you're making a decision, it is a decision it's. Um, I remember, uh, talking about it with you right at the beginning of this, like, people just feel like they need to do something. Right. And, and they just feel like, oh my goodness, everybody is talking about this. All of the experts are saying that it's gonna crush our, our economy and the markets are gonna gonna drop 50% like they did in no weight, et cetera, et cetera, et cetera. So they feel like, I think emotionally, as you said, you feel like you have to do something, but not doing anything is doing something, right. It is, you a re actively deciding no, I have a l ong t erm plan. I'm going to stick to that plan. And, and yes, hindsight's 20/20, but, but it's so interesting now having a year to look at it and seeing that of all of the, the things that, that I heard that w ere talked about and stuff, especially at the beginning about the economy and even my, my friends who really never followed this stuff about, you know, telling me, o h, you're i n, you're in the, the stock market industry or whatever, you know, you have to t hink that the markets are gonna crash, right. I mean, that's all you were he, and the fact of the matter is everybody was wrong.<laugh> all the short term speculators were wrong. We did not have that in a long term. We just, in, in the year, since COVID, we've had quite positive markets. And so if, if you think to that, are, are you surprised by that? Is there something, you know, that, that, that you just look back and say, Hey, this is, this is what we talk about. Um, or this is what we believe, and the data shows us it, but, you know, are you surprised by the fact that looking back a year from, from today, we've had positive markets despite everything else going on?
Sam Swift:Yeah, no, I'm, I'm never, by definition. I'll never be surprised with any returns that are a year or less, um, right. Statistically, uh, we underestimate the range of possible outcomes, uh, for sure. Uh, the general population and even most experts underestimate the range of, o f potential outcomes as you go through that. And I think, I think a key point on what you're talking about for what experts were predicting as you kind of go forward was, again, they're not immune to emotions as it comes through. They're not immune t o politics. A nd t his quickly t urned political, which is by definition, generally emotional as well. So when you start to intertwine these things, right, they're hammering you from every section, even sports, as we joked about earlier, every section of the newspaper is talking about this. You don't often have stories that that happens, right? You'll have your headline news, you'll have your finance section, you'll have your sports, but the whole story for the last year has been COVID and everything else i s completely dwarfed that. Right. But what I would point out is that a lot of experts and a lot of people that were panicked were not wrong in their predictions COVID is going to get worse. Um, we're gonna have terrible unemployment. We have a crazy election coming up. I think all of those things bore out and it didn't matter for markets basically, right. Or not that it didn't matter for markets said better is it's very tough to know how markets will react to all of those things. All of those things were incorporated in prices. Right, right. As it goes forward, it's just that investors didn't seem to see, uh, as big of an issue, therefore looking. So there was some optimism that this wasn't gonna last for ever. And so, but if you, you know, if you held me down and said, you know, you have to tell me, were you, were you truly surprised?
San Swift:And the initial bounce back? No. I think the, to some degree how markets were divorced from headlines really until the vaccine announcement. So what I kind of look at last year i s you can really divided into three pretty easy sections, which is everything leading up to March, you know, just the initial normal, normal kind of course of markets. Then you had the initial panic. So that that's k ind o f your first section through the initial panic. Then you had the initial recovery really until about November and then quite a bit different recovery. N ow the l ay p erson may not see how different the recovery looks post v accine announcement, but in terms of asset classes and where people are invested, it's looked, u h, looked quite a bit different. And depending on the industry you're in, u m, if you're running a company or, o r working for a company, u h, versus not to mention investing in it, u h, has looked very different.
Sam Swift:And so those, those three, um, there was a little bit of surprise, I guess, in the pre we knew a vaccine, but remember markets markets know this stuff that collective wisdom of the markets was reading the optimistic news about vaccine advancements, right. As, as it kinda came up. And that was going to be, there is a lot of it does turn out. I think the, the interesting thing is economically it does turn out and, and maybe all of you listening or feeling this, that for the broad swaths of the population, um, it was mildly annoying in the, and then for others, other, uh, you know, I don't know what the percentage is, 10 to 20% of the population. It was absolutely devastating. Mm-hmm<affirmative> whether you, whether you had somebody, obviously the worst case scenario being, you, you knew somebody that got sick and, and died from it, or, or was really hospitalized in a bad way. Um, or you worked in an industry where you were unemployed. You, you shouldn't have gone to work. We didn't want you to go to work right. As it kind of came through. And that, that dichotomy was odd, um, to say the least, it, but it that's how you can get markets that are pretty divorced from the broader economy from time to time. Um, and one of the reasons why it's so hard to predict them.
Scott Bennett:Right. And it, and it feels like there, there is that separation. I know it's happened plenty of times in the past where, where the markets don't necessarily affect the overall economy, but this was one where it just, I mean, yeah, you, you said it yourself, it, the doubt crept in, um, out, it became much harder to block out the noise and stuff. One of the things he said to me, uh, as, as we were talking was, and you kind of touched on it, here was everybody predicted. Right. All of the experts and forecast are predicted, right. That yes, the virus would get worse. Yes. Things are gonna stay shut down. Yes. We have a crazy election. That's going to cause turmoil. I don't think anybody knew it would cause that much turmoil, but they all guessed wrong in the direction that would put the market and how you said it, how the market would react. It's so interesting to think about. And, and why, I mean, I look at it now and, and, um, that kind of our message at the 3rd Decade of, you know, buying low cost and diversifying and holding for a long time as you're investing, um, is key. And it, and it just, this period has made it even stronger, um, that yet nobody knows how the market's going to react to things, but we, we have a very good idea how it will react in the long term. No,
Sam Swift:I think you, I mean that, that's one of the big points is kind of the day to day and it comes up very much last year and even month to month, week to week, year to year, even I, you know, but definitely on a day to day case, you are not gonna get an argument from me that it's any different than going down to your nearest casino. Right. And playing, playing the roulette wheel, right. Red or black, it's gonna be up about half the time, and it's gonna be down about half the time. And certainly when you're talking about individual securities, um, that becomes a big, big deal, but how do you win? Um, there one winner at casinos and it's the house<laugh>. Yeah. And there's, there's a way to become the house, which is to be in it for a long time, um, and buy your slice of economic progress. And that's what we're doing ultimately. Um, and that, that we have a lot of data and a lot of, um, you know, valid reason as to why that does grow over time. But, but yeah, any short term, you just have to have to sit back and that's what short term means. That's why it shouldn't be invested in the stock market as well. Right. Right.
Scott Bennett:So looking forward, I mean, obviously the world has changed because of COVID right. You touched on people's visual lives. There have been people massively affected by this to devastating rates. Um, but as a, as a whole even everybody's life has changed some as the world, we will be feeling the effects and, and seeing the changes of this forever. Um, it just was too big of event to not have some things carry over and some hopefully are good. You know, there, there are a few things I think that, um, that will come from this and, and being optimistic about it that are, are good changes to, you know, uh, the way we work and things like that.
Sam Swift:But sorry j ust one of those changes is that I have a three y ear o ld and five y ear o ld and haven't been sick in a year.< laugh>, u m, I've enjoyed that part of it. T here's other things about childrearing I haven't enjoyed, but that's a, a positive change.
Scott Bennett:It is a positive change, and, you know I think my, my three year old understands washing her hands more so than she ever would have makes a trend going forward. From a financial advising markets investing perspective, is there anything that you can see that has changed? Um, or is there anything you are communicating differently to your, to your clients or the people you work with because of this?
Sam Swift:On a, on a broad sense? No, again, like most things, it takes, it takes a lot to overturn a hundred years worth of data, right. As we go through it on a, um, on a much more detailed level, there, there are some changes, but it has less to do with COVID and more just on financial sciences continuing to move forward. So, um, as far as directly related to, to COVID the world dealing with a pandemic, no, there aren't changes, but there's always subtle changes in, in financial science and kind of the science of investing as you go forward. Um, how to better identify, you know, groups of stocks, uh, on a broad, broad basis asset classes that, uh, you know, that we can expect to do better. What we're ultimately always doing is we're, we're buying slices of our future income and more directly you're buying slices of that companies, future earnings. Mm-hmm,<affirmative> basically anytime you become an owner and, and what most of the science is pointing to, and all the academics are always, well, you wanna identify the best future slice of income for the cheapest price. Mm-hmm,<affirmative>, uh, essentially as, as you invest. So I want to all those being equal a company that's gonna have the exact company a, is gonna have the exact same earnings as company B. Um, but company a is cheaper than I want to buy company a all else being equal. Right? Of course, there's kinda unknowns in that we don't actually know what their future earnings are gonna be, but that's, that's what most of the science is trying to identify is what, what groups of stocks, um, are cheaper for their expected level of future earnings. And maybe we should, uh, you know, concent a little bit more there or overweight some of those, but again, that's all that all, all of that science was happening well before COVID hit and, uh, you know, nothing from nothing directly from the pandemic changes how we should invest in that regard.
Scott Bennett:Right. Well, I'm glad, uh, I don't have to understand all of that science that is, is key. I'm glad I can read the cliff notes version, uh, and, and, you know, understand that, you know, as you said, boiling it down to the, the simplicity, owning a slice is a lot less risky than owning one or two companies, right. Holding and owning everything is a lot diversifying your risk and, and doing it cheap. Then, you know, yes, there will be tweaks and everything to that moving forward. But, um, you know, in terms of, in terms of the, the complicated, stressful areas of, of having to predict one way or another, I'm glad you and I are, are out of that business or, or in that business to begin with.
San Swift:Well, what's, it's always more sophisticated behind the scenes. The good news is the application of all that science is, is relatively straightforward. And then it becomes a matter of sticking with it. Exactly. I'll add one thing on that. I mean, the, I guess if you want to go back to COVID and the recovery post crash, always good to revisit. So one of the, you know, the, in the communications, one of the first things I have actually wrote was a series on just back to basics, Hey, when things are going, Ayre, let's go back to what we know. Right. Um, basically right. And, and one of the most fundamental things is that prices are always based on information and expectations. Information is knowable. Now you have to be a crazy person to know all the possible information about a given company, but in theory, it is knowable, right?
Sam Swift:The collective wisdom of the market kind of prices in all available information, but what is much harder to know is the collective expectations of all participants. And I think to go back to the recovery of that, you know, some of that, despite headlines of record unemployment, worst GDP growth in a quarter, if expectations were so ridiculously low, that we were never gonna recover from this. Well, then just merely bad news can be good news for stock price, essentially because those expectations were so low. And I that's the piece to remember is that you're what is majorly, um, in every price at any given moment in any day is what people think of it. Game stop. Another good example. I know that's outside the scope here, but as a, as a recent headline, we won't go into that, but it's about that expectation and that's human nature. Um, and it's millions of humans participating in each time. And I don't know if any of you listening have noticed, um, but we are a weird creature and we odd heard behavior. And it is very hard to know, uh, what people's expectations are, especially in the collective. Um, and so, so it just becomes really hard to predict. And so that's a, if there's anything to learn from this, it's keep that in mind.<laugh> yeah. Expectations is the tough piece to know.
Scott Bennett:I'm still trying to figure out what my expectations are. So I'll, uh,<laugh>, I'll wait on trying to predict other people's well, thanks again Sam. Uh, yeah, it was, it just struck me as, you know, as you and I were talking, you're the person who I know personally who has read the most about this, studied this and communicated it, and you do, I know, uh, you know, the details and, and the intricacies better than most, but you do a really good job of, of keeping'em simple, uh, for the rest of us. So I appreciate you talking to the 3rd Decade to community as a whole, and for kinda everything you do at TCI that, and all your research that has led to a lot of art, same conclusions and things like that.
Sam Swift:Yeah, absolutely. No, thanks for having me. And, uh, you know, had I known all those years ago when I knew you, when you were much younger, that you would become such a, you know, just a wonderful world famous podcaster. So really what I would've done. So, you know, another, another example of not being able to predict the future, you know,<laugh>
Scott Bennett:World famous. Oh, man. All right. Thank you.
Sam Swift:Thank you.
Scott Bennett:Thank you everybody for tuning in and thanks again to Sam for coming on and talking with us. I hope you all enjoyed. And again, it was helpful for me and my wife, as we, as we talk through our own personal situation and having Sam to kind of take an outsider's approach and look at it and say, here's how this affects your goals. So that little bit of a reminder, no matter how often I talk about it in my day to day, life is, is always helpful for my own situation. Thanks again for tuning in, and we will talk to you again in a couple weeks.