The Market Changes Faster Than You Think: Build a Resilient Financial Plan

On this episode of the Canadian Money Roadmap, Evan and Sam argue that markets and life change too fast to predict, so financial success depends not on timing the market but on building a diversified, evidence-based plan focused on the variables you can actually control.

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Transcript

SPEAKER_02 0:01

In the investing world, things change quickly. A market can be one of the best performing markets in the world. Everyone starts talking about it, investors pile in, everyone you know is talking about it, and by the time that story has reached you, the situation has already completely changed. We just saw an extreme example of that in Korea. We talked about this on the podcast about it being one of the top performing countries in the world. But since we've talked about it, that market has fallen about 25%. So who knows where it's going to be by the time you actually listen to this episode? But this podcast isn't just about the story in Korea. It's a reminder of something quite a bit bigger than that, that your financial success not only doesn't have to, but it cannot depend on accurately predicting what happens next. So today, Sam and I want to walk through a few examples of how quickly some things can change in the markets, in the economy, even our own lives, and then talk about how to build a financial plan that is prepared for that uncertainty. So I hope you'll enjoy this episode of the Canadian Money Roadmap Podcast. Sam, as we're recording this today, the Blue Jays are playing an afternoon game. Last year, I know you made it out for the playoffs, all the way from Saskatoon. You made it out to Toronto for some playoff games. Was it one or two?

SPEAKER_01 1:17

Just a single playoff game, game seven of the World Series.

SPEAKER_02 1:20

You were hold on. You're actually at game seven? I'm forgetting this. Yes. Okay, so the the absolute high met by the absolute lows, and here we are. This has never happened before in baseball, having a team be in the World Series, and then subsequently afterwards be such a poor performer just the year afterwards. What are your thoughts? This is a sports hot take show all of a sudden.

SPEAKER_01 1:45

Yeah. What was interesting, and I think analogous about the Jays last year and the change of this year to Korea that you brought up in the intro is that pretty much everyone on their team, certainly the role players, had career years last year. And so we saw this huge kind of increase in the statistical numbers, and it's kind of come back this year to a much more, well, a lower number than we would have expected, even, but much more down-to-earth in that sense. And we're seeing something similar in Korea with this huge increase. And now we've seen this decline back to something that we would see as maybe a bit more reasonable returns. Yeah.

SPEAKER_02 2:20

So this episode we're going to be talking about some things that have really changed and how quickly things can change. And because it can feel pretty overwhelming if you try to keep up with this. Like sometimes I ask people, it's like, do you pay attention to the financial news? Just whatever, just kind of gauge where they're at. And always it comes with a measure of embarrassment of like, ah, I don't really pay that much attention. And it's like as if there's this expectation that people should be on top of things and that makes a difference. I think those two things matter together. It's fine to pay attention to the news and kind of see what's going on in the world and whatever. But the fact that paying attention to it might lead to some additional information that'll lead to better decision making. That couldn't be further from the truth. And part of that reason is because things happen so quickly, it's almost impossible to get out in front of it to be able to, you know, front-run some of the uh the things that happen. Um and so we're gonna talk about some of the things that could happen uh very quickly and some recent examples of these, and then afterwards try to address how to deal with this ongoing change, you know, the only constant is change kind of idea, and how to build a portfolio and a financial plan that has success, not despite that, but because of that.

SPEAKER_01 3:36

Yeah, exactly. And I think um just to add on to that point, we'll get into this a bit more in the podcast, but by the time we're seeing headlines on financial news, the stock market has already accounted for these changes because the stock market is forward-looking, and there are you know people that are on the front lines of that are trying to predict what's going to happen in the future. So often you can't get ahead in that particular way because often the the news has already been incorporated into the stock by the time you see it.

SPEAKER_02 4:04

Yeah. So let's get started with our first example here. We we've kind of led with this one. This is Korea. It could, again, this could flip by the time you listen to this episode. Who knows? But essentially, it's the story of a country getting absolutely spectacular returns. It's in the top five of total market cap out of all global markets, some crazy stuff. But of course, when that happens, it gets a pile of attention, and then as a result, it gets a bunch of enthusiasm from people trying to jump in and speculate on where it's going to go next. And inevitably, that turns into leverage. And in Korea, I saw this story reported a number of different places. I'm not sure where the data is actually coming from. So take it with a grain of salt here. I saw it reported in the Globe and Mail, but unfortunately, they had a typo which 10x the number in a way that doesn't make any sense. So, anyways, take this number with a grain of salt. But from what I've seen, many, many, many people in Korea, upwards of 1.2 million individuals, received margin calls just over this past weekend related to the decline in Korean stocks. There has been a massive push for leverage. And, you know, here in Canada and and uh the US, we've had single stock ETFs for a little while that have additional leverage on them. I've talked about them as products that are complete garbage that you do not need to have as part of your portfolio. But just two months ago, Korea approved these products, and now they've reversed on it because it's blown up so many people in such a short period of time. They said, huh, enough of this. That's my layman's interpretation of what actually happened there. But, anyways, that wouldn't be the driver of margin calls, perhaps, because the margin or the leverage is baked into the product. So this is in addition to that, people borrowing from their brokerage, and then the investment inevitably has declined so much that the brokerage says, you got to pay us some money back. And in most cases, they actually have the ability to just liquidate your positions and get their own money back. So it's not a gentle ask. It's give us our money now, or we're just gonna take it from you. So, anyways, this is what we've seen here in such a very, very short period of time. Now, don't get me wrong, the returns for the Korean market has actually still been pretty fantastic, broadly speaking. But these reversals, this has happened before in individual countries, individual uh stocks, commodities, all sorts of different things. This is just the most recent example of that.

SPEAKER_01 6:40

Right. And and in the context of this kind of sharp increase in the Korean market, the first six months of this year, part of the reason why so many people have been margin-called is it's where they bought these stocks, right? When they're up so high, there's this momentum, everyone's thinking it's gonna keep going and keep going. They see a news headline, maybe you get in, and then oh, all of a sudden it comes back down.

SPEAKER_02 7:02

So and when those conditions change, the leverage just makes everything worse. Right. Right. It magnifies returns in both directions. So we often are tempted to take a look at investments in the rear view mirror and see what has happened recently and assume that's gonna continue on forever in both directions, right? When things are going good and when things are going poorly. I've talked about this before. One of my favorite phrases in investing is this too shall pass. It's a great little reminder there. That's not really the point of this. But, anyways, this is one very recent example of how quickly some things can change. So we're talking about on the podcast of it being like this massive success story, and while we're recording those episodes, essentially the prices have uh meaningfully adjusted the other directions. So the stories are always changed. So don't take anything on this podcast or any podcast or whatever for specific investment advice for any number of reasons, but the timing of which is the thing that we're talking about here today. So that's just one example there. Now, a second example of how quickly things can change is not necessarily about what country is going to perform well, but any specific investing style. And it happens for the same kind of reasons, but we've seen this in the growth versus value stocks space. And the research that's publicly available out there, this isn't any one specific company that put this out, but this is Nobel Prize winning research about the factors that actually drive returns in the markets. Broadly speaking, there is some pretty strong evidence to suggest that small caps, value stocks, high-profit companies, a number of other factors as well, but those ones in particular have histories of outperformance in Canada, the US, and international markets alike. However, it is not a guarantee. And that's the whole part of the reason as to why it works, is that it can't work all the time, or else that would get arbitraged out of existence. And so in the times where, say, growth stocks or large cap or whatever, those ones are outperforming, it can be very tempting to just lean into those parts of the market, assuming that now those are the ones that are going to have the outsized returns forever. But that might not always be the case. So taking any significant bets based on the recent dominance of, say, U.S. mega cap tech, growth stocks, SP 500, whatever, might put you in a position to miss out when the rotation happens. And so we've seen that this year, where this is just in the US, but uh in Canada and international markets, small cap value is actually outperformed pretty significantly. But in the US, at the time of recording, again, things can change pretty quickly. At the time of recording, US small cap value has outperformed the S P 500 by 12.5% since January. And if you didn't own it in advance of that, oops, you missed it. Yeah, exactly. And maybe that's okay, but you have to be there before the party starts, or else it could flip back the other way again, right?

SPEAKER_01 10:04

Right. We're talking we'll talk a bit more later on about the ways we try to get there early in our planning work and our allocations. But the you know, this trend you're describing, Evan, is one that we see consistently. And so there's a really good study uh over 13 months of returns in the US that Dimensional put out, and it's from 2020 to 2021. And in the first anything going on at that time?

SPEAKER_02 10:28

It was what was going on in the world at that time?

SPEAKER_01 10:31

Well, we had COVID. Oh, right. Yeah, yeah, that old thing. Uh if we can still remember that far back, it's a ways ago in the rearview mirror.

SPEAKER_02 10:37

The COVID market was just kind of crazy. So the the data here is is very interesting to take a look back at in hindsight.

SPEAKER_01 10:45

Yeah, and so what we see is we see seven months where uh large growth stocks uh outperform small value stocks by 37% from March 2020 to September of 2020.

SPEAKER_02 10:58

So that was like coming right out of the bottom. So the bottom of the stock market globally was I think it was March 23rd or something like that, and then it bounced off the bottom and rocketed upwards from there. So for those first initial months, growth stocks really outperformed.

SPEAKER_01 11:13

And so then that was followed immediately by a period where uh small value uh outperformed large growth 64% over the next six months. So we see this rapid kind of shifting in which types of stocks do better over this time. And this is, you know, a a particularly kind of unprecedented time. But I think is that your line, Evan, that uh Morgan Housel stole from someone else?

SPEAKER_02 11:39

But things that have never happened before happen all the time.

SPEAKER_01 11:42

So this is perhaps an ex a particularly extreme version of you know unprecedented things that do come up more often than we think. But this is just an indicator of, you know, oh, in those seven months, maybe you shifted your allocations to oh, we need more large growth, and then as soon as you did that, oops, back to small value being better. So having a consistent strategy that accounts for these potential fluctuations is ideal.

SPEAKER_02 12:07

Yeah. And so the point that we're not making here is that you need to time the entry points into different styles. It's not sell growth and buy value or sell value and buy growth or profitability or dividends or whatever. It's why we own both at all times. Right. It's not about predicting, which is so refreshing and freeing is that when you own all styles together and you haven't concentrated your position so much into any one part, any one factor, any one country, anything like that, you open yourself to the opportunity to get tomorrow's returns wherever they might be. So these quick flips from growth to value, you can be there in advance. But committing to all one or the other ensures that you're gonna miss the next flip and inevitably lead to some version of disappointment.

SPEAKER_01 13:04

Yeah, and this goes alongside with investment theory, what we've seen an upward trajectory over time with lots of bumps uh along the way. But if you can diversify your portfolio with all these different types or categories of stocks simultaneously, then you're hoping you can ride that upward trajectory that we've seen over the last hundred years.

SPEAKER_02 13:24

Okay, our next example of how things can change differently looks at more the economy. So the main point here for this section is that the economy and the stock market, one, they're not the same thing, and two, they don't move together. I heard it explained one time like this. So back in 2020, my wife and I, we had a little dog. He was a Terrier Cross, and he was the most high-energy dog you've ever seen in your life. And you take him for a walk, and you're attached to the leash, but the dog is kind of going all over the place like that, right? You, as the person walking the dog, a little bit more stable, you're kind of going in a very similar direction, you might take some turns, whatever. That's kind of like the economy. And the dog out in front that's bouncing around all over the place, sniffing this and going from left to right and trying to cross the road and whatever. That's kind of like the stock market. So the stock market is a leading indicator, whereas the economy is a lagging one. So the economy looks backwards at what has happened, but the stock market and its participants, they're trying to look forward and anticipate what that's going to mean. And so here we look back at the Great Recession, as it's called back in 2007 to 2009 in the US. And the stock market, it started to take a dip in uh throughout 2008, but it took until the latter months of that year before an official recession was actually announced. And in again, this is a an audio-only medium here, but only a couple of months later the stock market bottomed and then took a steady turn upward and continued that way for the better part of a decade. However, it took another full calendar year before the end of the recession was announced. So if you are timing investment decisions based on economic forecasts, economic data, sure, that can all be part of the conversation or whatever, but the stock markets already beat you to it. It's already there. And so things can change very quickly. One for the economy, but the stock market's it's already doing that, right? And so this is just another example of why timing the market based on stuff you're reading is just a really poor way to build an investment portfolio and a financial plan around that portfolio.

SPEAKER_01 15:45

Right. We can't assign any predictability or consistency to timing the market because we ultimately do not know when the market's going to bottom out, when's going to be a good time to buy back in. And the attempt to time the market, as you're saying, Evan, it just produces so many more variables. In lots of cases, as we approach it, we're trying to simplify things as much as possible, diversify, have all these different categories of stocks, and increase the expected return over times by doing that and make it in line with you know time horizons and all those things. But the more variables you introduce, we're going to pull it out now. When do I get it back in? How do I it just becomes harder and harder? And the the evidence points directly to that this is not a reliable way to secure better returns. And in fact, it's more likely to lead to losses.

SPEAKER_02 16:32

Yeah, you have to get more than one decision right over and over and over and over and over again. And diversification. No, it's not the path to riches necessarily, like in the lottery ticket type sense, but it's a pretty reliable way to get your share of the uh the returns from participating in the global economy.

SPEAKER_01 16:53

So it's analogous to me, uh, like working on a certain technique in a sport, like I think about basketball in that way. The more variables you add in, you know, you you go through shot. I always tried to break it down in a way that was as simple as possible, go A to B and as quickly as possible with as few movements. Might not make the shot, but you give yourself a better chance of replicating the same process that will allow you to do better more often.

SPEAKER_02 17:16

For sure. For you know, there are the Sean Marions of the world that have a completely whacked jump shot. But for every one of those, you got a lot more Ray Allen's and Steph Curry's where things are really tidy and things make a lot of sense. Exactly. It's not impossible to do well with overcomplicating things. It's not impossible, but the odds are stacked against you. So moving on to the kind of the next thing, is like we're talking about external things there, but also your life can change a lot too. It can change very quickly. In my role here as a financial planner, I've been doing this for almost exactly 10 years now. I've seen this happen a few times. I think three times this exact scenario has happened. We're meeting with somebody, maybe it's a child of a client or something like that. And here in Saskatchewan, buying a home is a lot more realistic than other parts of the country. So maybe this story falls on deaf ears for those of you that are um saving or helping your kids save for a down payment, uh like $200,000 plus or whatever. But here, buying a house reasonably soon after getting a job is is pretty realistic. And so I think three separate times I've had a situation where someone says, Yeah, I think I'm gonna plan to buy a house in five years, and then three months or less from that initial conversation, they come back to me and say, We bought the house, I need the money back. And the problem with that is not that, you know, the job changed, a relationship changed, health changed, opportunity came up, whatever. It's that we might have allocated that money differently had we more critically thought about the actual timeline and things like that. And so things can change because you don't live on a spreadsheet, but at the same time, you have to be realistic about all those things that are uh able to change in your life and allocate accordingly, knowing that those things are not constants and the things that you think of uh that are going to be the same for now and for always probably are gonna change at some point. So allocating uh your savings with a an appropriate risk profile, assuming things will change, can really make the difference between, you know, making uh a reasonable amount of return for your timeline or accidentally getting it wrong and uh investing too aggressively and then finding yourself in a position where you're left trying to pick up the pieces afterwards.

SPEAKER_01 19:44

Yeah, the emotions that go into losing money versus making money is an interesting discussion in that context, like of uh say for a down payment, right? If you open an FHSA, you say, Oh, I have a five-year timeline, so it gets invested in a bit more of an aggressive portfolio, and you need the money in three months. If you've got uh, say 16,000 set aside to go towards that, and it's down 500 bucks, that's gonna, you know, be pretty hard to take, versus if it's up maybe a thousand at the time, you know, it's not gonna move the needle so so much. So there's some of that emotional considerations in those decisions as well.

SPEAKER_02 20:21

Yeah, well, like we all have that loss aversion, you know, built into us, like where we feel losses way more than gains. And so, anyways, allocating appropriately for timeline is great. But at the same same time, it's not about predicting your life perfectly either. You just need to have enough flexibility that when your life changes, you can adapt. Um, so anyways, what do we actually do about all this stuff, all these things that change? You all know this. So, how do we actually build a financial life that can handle some change? We got a few principles here, not exact accounts to use and dollars to save or anything like that, but principles to follow. The first one, and we've alluded to a lot of these already throughout the episode, but the first principle is start by accepting that you don't know what's coming. This is at the top of our investing philosophy. If you take anything away from the podcasts that you hear from us, is that we don't know what's gonna happen next, but most importantly, no one does. No one knows what's gonna happen next and behave accordingly, right? Again, we're gonna use that line that I'm taking from the psychology of money. It says that things that have never happened before happen all the time. You gotta have humility because nothing is guaranteed.

SPEAKER_01 21:32

And going along with that, we acknowledge that there are people that get into more concentrated funds or things like that that do well. There's always going to be a particular ETF or fund that does really well for a short period of time, but a key is replicability. And if you acknowledge you can't predict the future, then you look more at the process than the results to make those decisions.

SPEAKER_02 21:53

Yeah. And also we're we're coming from the lens of we're allocating millions of dollars of our clients' money. And if like if you want to take a bet with your own money, that's probably a different situation than the professional responsibility that we have. And and and I guess perhaps maybe we're I'm just overthinking through that lens of that we want to have a backbone for why we're recommending things to clients and uh perhaps more importantly why we're recommending we don't do certain things in other cases. But I think that's a principle that everybody can believe. I think I think everybody can believe what we're talking about, but I think it it weighs perhaps more heavily on us as people that are actually managing money for our clients.

SPEAKER_01 22:37

Right. Yeah, good point. Principle number two, don't assume that you're faster than the market. And so we've already mentioned this. The stock market is an incredible information processing machine. And there are not only computer programs, but individuals that are devoted to following the market and trying to, you know, make decisions based upon the information that's available. So if you're seeing it on TikTok or on the news or on a podcast, you're already behind.

SPEAKER_02 23:04

We were uh sending Instagram reels back and forth here a little bit. And this morning I saw one just from a few days ago that was talking about these are the top three ETFs that I'm buying. And one of them was a chip st uh stock ETF, another one was memory or something like that. Anyways, it was uh it was presented with the line of, and I believe that's why these will continue to outperform the SP 500 long into the future. And then it's it's not to say that things can't outperform the SP 500, the SP 500 is not the the gold standard of anything, but just to predict that one thing is going to be the best for a longer period of time, it's just opening yourself up for uh a little dose of a hubris. And that showed up in one of his later videos where he talked about these sectors are now getting smoked and whatever. So he backtracked on on that almost immediately. So it was just kind of a funny situation there. But don't assume you're you're faster than the market. Also, don't assume you're smarter than the market. Yeah, the market's got a lot of things right.

SPEAKER_01 24:14

Principle number three diversify and resist the temptation to reconcentrate.

SPEAKER_02 24:20

Oh man, again, this is we're finding all the Instagram stuff here. Um because now that we're looking for it, I'm getting all these recommended uh things like I'm getting a bunch of dividend investors and what I'm just my head's just exploding. Like, you gotta buy this covered call, bank UTF. It's like no, no, you don't. Anyways, but this this guy that I saw, he was trying to show his world beating portfolio. He's a Canadian when he's owning an SP 500 index fund, and then some individual holdings on top of that of NVIDIA, Google, Amazon, and Tesla. Like, these are already some of the largest holdings in your index already. And they're already at a concentration that's higher than a lot of periods of time that we've ever seen for top 10. Like concentrating into the biggest names has some of the clearest evidence for future underperformance. Um, we've talked about this on the podcast before, but there's some really damning data in that regard. So it's again, it's not impossible to do well by owning exclusively concentrated positions of really big stocks. It's not impossible, you but just are not stacking the odds in your favor.

SPEAKER_01 25:34

Yeah, and so this is one reason why we often like to use the all-in-one portfolios because they have a set allocation within the funds themselves and they get balanced internally, so you don't have to worry about trying to reconcentrate if it's done for you. So that not only creates some simplicity, but it allows for this strategy to be more consistent over time.

SPEAKER_02 25:55

Because it makes sense, right? You like that that one would want to buy the things that are biggest and have the biggest name recognition and are making the most money, you think, boy, that's gotta be where all the returns are gonna be next year. Why don't I, when I'm adding my $500 a month investment, why don't I add it to the stuff that's gone up most recently? In some cases, that theoretically can work, but it is hard to get that decision right over and over and over again. And when the tide turns, like we've seen in the in the uh the story with Korea, with the you know, the broadening out of returns to value stocks outperforming growth now. Where do you add the next marginal dollar? Do you just keep chasing the thing that's currently doing well? Or do you want to take that decision out of your hands, buy something that's already pre-diversified in a ratio that has some evidence for why it is the way that it is, something that rebalances for you? Boy, what a life! Wouldn't that be nice? Oh, wait, you can. Yeah, you can do it. It's fantastic. Um, and I know so many of you listening here and uh and our clients, you know, stand uh to receive the benefits that are out there. Uh here in Canada, we actually have a lot of great all-in-one products that our friends in the US do not have, believe it or not. And of all the thousands of products that are out there, um, we've kind of been at the forefront of a lot of these all-in-one ETFs. I think it's probably because we're more likely to be internationally diversified as opposed to Americans that uh have a lot of pretty significant home country bias. And so it's like, well, what do you mean, all-in-one? I own the S P 500. That's that's what I need. Again, there's a lot of great evidence that has come out of US-based scholarship, actually, that suggests that global diversification has a lot of value even for US investors. Anyways, another point for another day, but using those products can really help you diversify and resist the temptation to add concentration where things already are.

SPEAKER_01 27:53

Yeah, so moving on to principle four, this is another simple one, but I think an important one. Leave room to be wrong. And so what we mean by that is largely just what happens if things don't go as planned? What happens if I'm wrong about a particular decision? What's my financial situation in that case? And so asking some of these questions about potential outcomes, particularly with a given strategy that you're implementing, can help define or help help clarify maybe where you should be allocating the money or how you should be allocating it.

SPEAKER_02 28:26

Investing inherently is an optimist's exercise, right? Like you're trying to find growth tomorrow, so you have to believe that something's gonna get better from here on. And so to flip that on its head and say, wait a second, how does this blow up? Knowing how the investment that you choose, knowing how it has the potential to go wrong, I think is a really important exercise. One, for how you allocate money in the first place, but two, how it's gonna impact your goals and your ability to reach them by making any of these decisions, right? Like if you're leveraging five to one into the Korean market and it goes down 30%, what happens then? How do you come up with this cash? Right? Unfortunately, millions of people are trying to figure that out here this week. But all sorts of different things can happen here. It's just the idea that you want to take a step back and say, okay, I believe this to be true. Wouldn't it be awesome if it works out? Things are gonna look great if if it does, but what if I'm wrong? What would I do differently if this was wrong? And maybe this is just a sober second thought, but just asking that question is kind of like a premortem for financial decisions. I think it can make a big difference. For us as advisors, we have to understand how investment products work. And I think it's important to explain that to clients of what kind of range of potential outcomes are possible with an investment strategy. So especially if you're a DIYer, take a step back, assume that things aren't going to work out perfectly all the time, and then start introducing a little bit of stress into the scenario and see if things still work out okay and if you're comfortable with being wrong.

SPEAKER_01 30:07

And yeah, this is an interesting one as well, because occasionally we hear from people that say, you know, I'm I've got most of my portfolio in an all-in-one product, but I want to kind of use a little bit to see what I can do with it, right? And this is an interesting, even this question, you know, what if you're wrong or leave room to be wrong? It fits into that context as well. Like, how much can you essentially go and gamble in the stock market? We're not saying that, you know, for some people that that can be okay. And if you find that fun and engaging, you want to try it out, but the question you'd ask is, okay, what if I lose all of this in this case, right?

SPEAKER_02 30:41

Yeah. And and for some people, I know a couple of people that that I'm thinking of that like to do that on the side and they know it's silly, but they they like it. But I don't have a problem with that because for the ones that I'm thinking of, their plan allows for pretty significant wiggle room, and they're they're picking stocks with you know single thousands of dollars, not hundreds of thousands plus leverage, you know, like this kind of crazy stuff. It's like if you want to dabble in things that you know are a little bit silly, treat it as entertainment a little bit. Probably be on the same page with your spouse. Like, this is the kind of thing, just like gambling, it can very quickly create some problems in the household. Again, this is not a marriage podcast or anything like that, but just be careful. Don't do these things kind of um under the cover of darkness, if you will. But if there's room within your plan to be a little bit reckless, whether that's buying something a little frivolous or making some individual bets on the stock market, it might be okay too. You know what I mean? But it just has to work within that plan so that you can afford to lose it.

SPEAKER_01 31:52

But so then that question remains still valuable. What happens if I'm wrong? And in certain cases, it's like I'm pretty much in the same spot. It's not great, but I'm willing to have a bit of fun or use as entertainment or whatever it is. So that's possible as well. But doing that second thought and at least kind of going through the exercise of thinking about the implications of a particular decision is is very important. So moving on to principle five, build your plan around the things you actually control. This is a significant one, and you know, there's lots of things you can't control. But Evan, what can we control when we're thinking about our investments and portfolios?

SPEAKER_02 32:29

The nice thing is you can control a lot of it. And we were just talking to somebody today where it's like a the bulk of their plan, like it's got a lot of moving pieces, but the things that it's relying on the most are the things that are actually in their control. Doesn't mean it's easy, but they control it, right? Which is nice. And so again, it helps you understand the outcome of your actions as opposed to just like, oh, you know, market's gonna do what the market's gonna do, and now I'm broke. It's like, nah, we can do better than that. If you have a plan that focuses on the things that you can control, like your savings rate, how much you're spending, when you're spending, your asset allocation, the diversification that you have within that asset allocation, your retirement date, when you start CPP, when you start OAS, which accounts you're gonna withdraw from, you know, all these different things. There's tons of them that actually move the needle. And all of those you generally have pretty significant control over those things. But you don't control which country leads the market next year, you don't control when certain factors are gonna outperform, you don't control when recessions happen, you don't control who sits in the White House or you know, in uh whatever political seat is most relevant to your newsfeed, whatever uh situation is in uh in that sphere, you don't control that either. And so if you have a plan that focuses on the things that you can control, you don't have to win the stock market lottery to make it all work. In fact, one of the biggest risks to a perfectly good financial plan is deciding that good enough isn't good enough anymore. And, you know, we've talked about the pursuit of enough and why that is such a valuable goal to have. And the uh, you know, the opposite of that of just building up piles of cash for the sake of piling them up can't be a goal in and of itself because there's never going to be enough if that's the objective, right?

SPEAKER_01 34:23

Yeah, and I would just say that we harp on this all the time on the podcast. We're a bit of a broken record, but that's where the planning becomes so essential. Defining what that ultimate goal is, savings goal, uh lifestyle you want to support in retirement, all these things gives the structure required to inform how you approach the variables you can control. If you don't know what the end point you want to get to is, it's hard to know how much do I actually need to save? How much can I actually spend? All those different things. So yeah, that's where that getting a clear picture of what you want retirement to look like can help inform how you approach those variables you can control.

SPEAKER_02 35:02

Yeah. And then the things that you don't control just don't matter as much. You're less likely to be consumed by the greed when you actually have a clear vision for your life and the clear actions it's gonna take to accomplish that. And in most cases, a prudent financial plan does not say try to pick a winner and ride it and hope it never goes down again. You know, that's not gonna happen, right? And so you're just less likely to want to engage in that activity if you have a plan that has a to-do list of all the actions that you need to take every month. Kind of takes some of the guesswork, some of the stress off, a lot of the pressure, you know, and it takes a lot of the greed out of the equation because greed is one of the primary killers of prudent financial plans. If you've got a plan that works, you care a whole lot less about when certain bits and bubs of the markets change, when recession announcements happen, all these different things that are outside of your control because they're happening fast. And it doesn't matter if you get the timing right or not, or trying to predict it, or you read the wrong newspaper at the wrong time, or whatever, get you a plan that works despite the timing of all these crazy events that are always going to be part of your life.

SPEAKER_01 36:17

So I think that's a good moment to move on to our final principle, and that is just simply stay in your seat. And what we mean by that is have a plan, have an evidence-based strategy that helps you achieve that plan or you know, projects to help you achieve that plan, and don't try to time the market, stay in your seat, follow your plan, follow a strategy that you're comfortable with for your time horizon and your goals.

SPEAKER_02 36:40

And all of these things will help you hopefully live fully and retire confidently. That's what we believe here at Cedar Point Wealth. If this has resonated with you at all and you're interested in having us build a plan for you, take a look at the show notes of this episode, and feel free to reach out and we can have a quick introduction call and hear more about your story and what's important to you and see if our services align with what you're trying to accomplish. But we really appreciate you being here over summer, listening to a podcast about money in summer. We can't even believe it. This is so great to have you listening along with us. We appreciate you, and we will see you next week with another episode of the Canadian Money Roadmap Podcast. The contents of this podcast do not constitute an offer or solicitation for residents in the United States or any other jurisdiction where Evan Newfeld, Cedar Point Wealth, or Sterling Mutuals is not registered or permitted to conduct business. Mutual funds are provided through Sterling Mutuals Inc. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus carefully before investing. Mutual funds are not guaranteed, their values fluctuate frequently, and past performance may not be repeated. Financial planning services are provided by Evan Newfeld through Cedar Point Wealth and are not the business of or monitored by Sterling Mutuals Inc.