[0:00] Shannon Warwick: I would be one who would say, "Uh, I wanna wait for the big sale. I don't wanna do this."
[0:05] Ryan Warwick: Yeah.
[0:05] Shannon Warwick: You know? Or I just- it's just not safe.
[0:07] Ryan Warwick: Yeah.
[0:07] Shannon Warwick: I, I, I would. I really think that I would, and I think that I would say, "Ooh, I think I just need to dip my toe. Okay, now I think..." I would be very hesitant.
[0:16] Ryan Warwick: Yeah.
[0:17] Shannon Warwick: I'm just being honest.
[0:19] Ryan Warwick: Um, we want people to recognize that that's normal.
[0:23] Shannon Warwick: Mm-hmm.
[0:23] Ryan Warwick: I, I don't think it's normal for people to just
[0:27] Ryan Warwick: say, "Yeah, I'll, I'll put it in and not worry about it." The only benefit of DCA, or dollar-cost averaging, is an emotional benefit.
[0:36] Shannon Warwick: Yeah.
[0:37] Ryan Warwick: My greatest value to you as, as a client is to be an emotional barrier between you and your money.
[0:49] Shannon Warwick: Mm-hmm.
[0:49] Ryan Warwick: Welcome to the Worth Beyond Wealth podcast.
[0:51] Shannon Warwick: Where net worth meets personal worth. I'm Shannon.
[0:54] Ryan Warwick: I'm Ryan. We help families navigate the emotional, relational, and personal realities that money alone can't solve.
[1:01] Shannon Warwick: If you've built wealth but still wonder what it all means, or how to keep your family grounded while protecting your legacy, you're in the right place.
[1:09] Ryan Warwick: We sit down with experts, and with you, to talk identity, purpose, and connection beyond the balance sheet.
[1:16] Shannon Warwick: Because true wealth isn't measured in dollars. It's measured in the impact we make and the relationships we nurture.
[1:22] Ryan Warwick: So grab a seat-
[1:23] Shannon Warwick: Take a breath-
[1:24] Ryan Warwick: And let's redefine what it means-
[1:26] Shannon Warwick: To be truly wealthy together.
[1:28] Ryan Warwick: This is the Worth-
[1:30] Shannon Warwick: Worth Beyond Wealth
[1:30] Ryan Warwick: ... Beyond Wealth podcast.
[1:33] Shannon Warwick: Hi, Ry.
[1:34] Ryan Warwick: Hi.
[1:35] Shannon Warwick: It's good to see you. I saw you for a little bit this morning before I was heading out the door to take a kiddo to school at 7:15 AM.
[1:42] Ryan Warwick: It's good to be seen.
[1:43] Shannon Warwick: Yeah. Yeah. Um, well, today we're gonna talk about, I don't know if it's a fun topic. Maybe we can make it fun. What do you-
[1:52] Ryan Warwick: Well, they're all fun topics, so we'll-
[1:55] Shannon Warwick: To you
[1:55] Ryan Warwick: ... we'll just start there, yeah.
[1:56] Shannon Warwick: Yes.
[1:56] Ryan Warwick: Yeah.
[1:57] Shannon Warwick: Uh, dollar cost averaging.
[1:59] Ryan Warwick: Okay.
[2:00] Shannon Warwick: And we'll maybe throw in a little compounding for fun. Let's open it up with you giving us a look into what DCA, or dollar cost averaging, is, and then how it works.
[2:11] Ryan Warwick: Okay.
[2:12] Ryan Warwick: So
[2:14] Ryan Warwick: dollar cost averaging is, uh, kind of summed up in the title, but it's when you are taking, uh, an amount of money, let's just call it $100.
[2:24] Shannon Warwick: Mm-hmm.
[2:25] Ryan Warwick: Uh, and you're periodically investing. So that could be on a m- every month basis. So at the first of every month you put $100 in.
[2:34] Shannon Warwick: Mm-hmm.
[2:35] Ryan Warwick: Um, this would often be what people are doing in their 401 accounts. Uh-
[2:39] Shannon Warwick: Right
[2:39] Ryan Warwick: ... so they, they earn money throughout the, the month. They get paid. Part of that money, uh, gets withheld from their paycheck and goes over to a 401 and gets purchased.
[2:50] Shannon Warwick: Mm-hmm.
[2:50] Ryan Warwick: And so this month you're purchasing, uh, $100, or whatever that amount is, um, uh, of shares.
[2:58] Shannon Warwick: Mm-hmm.
[2:58] Ryan Warwick: And, and those shares, the, the number of shares you're going to buy is dependent on the price of that, uh, investment at the time. So you buy some shares and, and next month you do the same thing. And, and every single month for a long time you buy that $100 and, and therefore you're averaging in the price of that investment.
[3:21] Shannon Warwick: Mm-hmm.
[3:22] Ryan Warwick: S- versus saying, "I'm gonna put all of my money in on, on day one." So high level, that's what dollar cost averaging in i- is. It's putting money into an investment over time versus today or all at once.
[3:36] Shannon Warwick: Right. So it's a disciplined practice.
[3:38] Ryan Warwick: Yeah.
[3:39] Shannon Warwick: Um, by nature. And then also, I'm just wondering, is it really a fairly new practice? Because 401 s are fairly new, actually, and we've talked about that in, in other podcasts, but the '80s was when that really started to roll out for people to utilize the power of the 401.
[3:57] Ryan Warwick: Yeah. A- and I think, um, it wasn't even, it hadn't occurred to me, but you said something there. It's a disciplined practice, right?
[4:04] Shannon Warwick: Mm-hmm.
[4:05] Ryan Warwick: That is so true.
[4:09] Ryan Warwick: And one of the major values of, uh, dollar cost averaging at all is that it puts in place a discipline. Hey-
[4:18] Shannon Warwick: Right
[4:18] Ryan Warwick: ... every month this happens.
[4:20] Shannon Warwick: Yeah. This is a disciplined practice.
[4:21] Ryan Warwick: And, and so I don't, I don't wanna just let that,
[4:24] Ryan Warwick: you know, comment fly by, that anything you can do to put discipline in place into your wealth building practices is an important, uh, action or activity.
[4:37] Shannon Warwick: Yeah, absolutely.
[4:38] Ryan Warwick: So, um, good, good call out there.
[4:40] Shannon Warwick: So is this a fairly new practice-
[4:42] Ryan Warwick: Oh, yeah
[4:42] Shannon Warwick: ... because the nature of 40-
[4:44] Ryan Warwick: 401 s, yep.
[4:44] Shannon Warwick: Yeah.
[4:44] Ryan Warwick: No.
[4:44] Shannon Warwick: Yeah.
[4:45] Ryan Warwick: Uh, the answer's no.
[4:46] Shannon Warwick: Okay.
[4:46] Ryan Warwick: So yes, 401 s are relatively new.
[4:49] Ryan Warwick: Um, but the idea, I mean, dollar cost averaging is, is simply an idea.
[4:54] Shannon Warwick: Mm-hmm.
[4:55] Ryan Warwick: It's just the i- the, the concept of averaging in over time. So it's certainly, um, that idea of averaging in would've occurred before 401 s, because it doesn't just happen in retirement accounts.
[5:08] Shannon Warwick: Right.
[5:08] Ryan Warwick: People can do this in their monthly savings of, of all of their, you know, other investments as well.
[5:14] Shannon Warwick: Mm-hmm.
[5:14] Ryan Warwick: Um, so no, it's, uh, I would say it's been around, uh, you know, just as an idea, a long time.
[5:21] Shannon Warwick: Mm-hmm.
[5:22] Ryan Warwick: Um, because ultimately dollar cost averaging is a risk mitigating practice.
[5:31] Shannon Warwick: So that's a good segue. I, I wanted-
[5:33] Ryan Warwick: Which, which has been around long before 401 s.
[5:35] Shannon Warwick: Right. I wanted to kind of chat about that and just bring in the emotion behind the money, which we talk about often.
[5:42] Ryan Warwick: Yeah.
[5:42] Shannon Warwick: Probably every podcast, actually.
[5:45] Ryan Warwick: Yeah. It,
[5:47] Ryan Warwick: as, as this is titled Worth Beyond Wealth.
[5:49] Shannon Warwick: Exactly.
[5:51] Ryan Warwick: I mean, emotions are just such a huge part of, of experiencing worth, um, beyond a number, beyond the wealth.
[5:59] Shannon Warwick: Yeah.
[6:00] Ryan Warwick: Yeah, and, and we believe strongly that behavioral finance or the, you know, how people emotionally relate to money, you know, which goes back to, as we've talked about, early upbringing and-
[6:13] Shannon Warwick: Mm-hmm
[6:13] Ryan Warwick: ... and all sorts of things. So money, money invades so much of our life that, um, emotions are a, a huge piece, and-
[6:19] Shannon Warwick: Yes
[6:19] Ryan Warwick: ... it has to be part of this conversation.
[6:22] Shannon Warwick: If you're... So let's, let's kind of run with that, the emotions behind money. If you're new to investing,
[6:30] Shannon Warwick: if you, um, you have a low tolerance for risk, is dollar-cost averaging a good idea for you?
[6:40] Ryan Warwick: Um,
[6:42] Ryan Warwick: yeah, so why don't, why don't I take that in
[6:46] Ryan Warwick: a slightly different direction?
[6:47] Shannon Warwick: Okay.
[6:48] Ryan Warwick: Um,
[6:49] Ryan Warwick: because there are two
[6:52] Ryan Warwick: general scenarios for dollar-cost averaging, like broad. You, you have the scenario where,
[6:59] Ryan Warwick: look, I'm investing in a 401 -
[7:02] Shannon Warwick: Mm-hmm
[7:03] Ryan Warwick: ... or an IRA,
[7:05] Ryan Warwick: and, and this happens over time. So even if in your 401 you might be a self-employed individual who has a, a plan set up where you can invest all of your 401 money each year on January 1st.
[7:22] Shannon Warwick: Mm-hmm.
[7:22] Ryan Warwick: Okay? Well, you're still dollar-cost averaging-
[7:25] Shannon Warwick: Interesting. Okay
[7:25] Ryan Warwick: ... every year.
[7:26] Shannon Warwick: Yeah.
[7:27] Ryan Warwick: Okay, so effectively any 401 account is being averaged in because you can't put... You don't have, you don't have the money, and you can't put it all in in, at this time because there are rules around how much can go in in any given year.
[7:44] Shannon Warwick: Mm-hmm.
[7:44] Ryan Warwick: So any 401 is being averaged in over some periodic time period, right?
[7:50] Shannon Warwick: Right.
[7:51] Ryan Warwick: A, an IRA is the same, so I could invest in an IRA, individual retirement account-
[7:57] Shannon Warwick: Mm-hmm
[7:57] Ryan Warwick: ... or a Roth IRA. I could put a little bit of money in every month, or I could do it all at one time each year, but regardless, I'm averaging in, okay? So
[8:10] Ryan Warwick: any of those kind of accounts-
[8:12] Shannon Warwick: Mm-hmm
[8:14] Ryan Warwick: ... we really don't have a choice of whether or not we're averaging in.
[8:18] Shannon Warwick: Mm.
[8:19] Ryan Warwick: Largely. We're speaking of the people who are, you know, currently working and, and, uh, and, and putting money in and, and investing it periodically versus somebody who, um, rolls a 401, uh, you know, let's say a million dollars over into an IRA.
[8:35] Shannon Warwick: Right.
[8:36] Ryan Warwick: Now we have a different discussion. But we're talking about employees working and saving.
[8:39] Shannon Warwick: Ex-
[8:39] Ryan Warwick: Okay?
[8:39] Shannon Warwick: Exactly.
[8:40] Ryan Warwick: So you don't have a choice. So to your question of is it a good idea for the new investor, well, it's a forced idea.
[8:47] Shannon Warwick: Okay.
[8:48] Ryan Warwick: Okay? In that sense.
[8:49] Shannon Warwick: Mm-hmm.
[8:49] Ryan Warwick: So then let's, let's take that, that's kind of bucket one of people that dollar cost average.
[8:56] Shannon Warwick: Mm-hmm.
[8:56] Ryan Warwick: Bucket two now is
[8:59] Ryan Warwick: people who have... We're talking now about just money to invest outside of retirement accounts.
[9:04] Shannon Warwick: Mm-hmm.
[9:05] Ryan Warwick: Um, this could be, you know, a common scenario might be, uh, we just inherited some money.
[9:11] Shannon Warwick: Mm-hmm.
[9:12] Ryan Warwick: Or we got a big, big bonus at, at work and, uh, or a company sold, or, you know, some- we got some lump sum of cash-
[9:21] Shannon Warwick: Right
[9:22] Ryan Warwick: ... and we need to decide what to do with it.
[9:24] Shannon Warwick: Mm-hmm.
[9:24] Ryan Warwick: Okay? So now, a- and we've never invested before-
[9:28] Shannon Warwick: Exactly
[9:28] Ryan Warwick: ... so I'm gonna go with kind of-
[9:29] Shannon Warwick: Yeah. I'm new to markets
[9:30] Ryan Warwick: ... teasing out the nature of-
[9:31] Shannon Warwick: I'm new to markets
[9:31] Ryan Warwick: ... your, your questions.
[9:32] Shannon Warwick: Yes. Yeah.
[9:32] Ryan Warwick: I'm new to markets.
[9:33] Shannon Warwick: Yeah.
[9:33] Ryan Warwick: So is dollar-cost averaging a good idea? Um-
[9:35] Shannon Warwick: If I'm risk-averse, is this a good idea for me?
[9:38] Ryan Warwick: What we tend to see with new investors is that there is an, um, there's a l- a, a general lack of familiarity-
[9:47] Shannon Warwick: Mm-hmm
[9:47] Ryan Warwick: ... with the markets, how they behave,
[9:51] Ryan Warwick: because you haven't, you haven't built up scar tissue over the years-
[9:54] Shannon Warwick: Mm-hmm
[9:54] Ryan Warwick: ... because you haven't lived through markets-
[9:55] Shannon Warwick: Mm-hmm
[9:56] Ryan Warwick: ... um, that have been cut in half.
[9:58] Shannon Warwick: Right.
[9:58] Ryan Warwick: And so y- so-
[9:59] Shannon Warwick: Volatility is new for you
[10:00] Ryan Warwick: ... so yes, it can be a very good idea-
[10:03] Shannon Warwick: Yeah
[10:03] Ryan Warwick: ... um, be, f- from this perspective-
[10:06] Shannon Warwick: Mm-hmm
[10:06] Ryan Warwick: ... managing emotions.
[10:07] Shannon Warwick: Mm-hmm. And I think we were having a little chat, uh, well, it was yesterday actually, getting ready for this podcast, and one of the things that we kinda decided was it's like dipping your toe in the cold water.
[10:21] Ryan Warwick: Yeah.
[10:22] Shannon Warwick: And, and you had a great... Walk us through the scenario that you were walking me through on how you would help a client bringing this money in. They're new to markets. They're not comfortable with volatility.
[10:33] Ryan Warwick: Mm-hmm.
[10:33] Shannon Warwick: This, this is, this is new. And, and maybe they do have a very low tolerance for risk, so how you would help them learn how to engage in markets, but we kinda talked about it's like dipping the toe, and then you get up to the knee, and then you get up to your waist, and then pretty soon you're up to your neck and you're comfortable. You're okay.
[10:52] Ryan Warwick: Mm-hmm.
[10:53] Ryan Warwick: Mm-hmm. Yeah.
[10:56] Ryan Warwick: Uh, generally somebody might come in,
[11:00] Ryan Warwick: uh, a common scenario, again, uh, they've inherited some money.
[11:03] Shannon Warwick: Sure.
[11:03] Ryan Warwick: They, they've never been investors.
[11:06] Shannon Warwick: Mm-hmm.
[11:06] Ryan Warwick: And so we're walking through an educational process to first and foremost g- give them knowledge and, and hopefully wisdom around h- how markets expect. We want them to go in eyes wide open. It's not, uh, as we've said on prior podcasts, y- we don't want you to think it's what if the market goes down.
[11:26] Shannon Warwick: No, when.
[11:26] Ryan Warwick: No. We're going to prepare you for when the markets go down.
[11:29] Shannon Warwick: Yeah.
[11:29] Ryan Warwick: This will happen. And guess what? It's probably going to happen the day after you invest.
[11:35] Shannon Warwick: Exactly.
[11:35] Ryan Warwick: There's, there's Murphy's Law, right? Um, so w- we don't, uh, but we don't know. A- and so for that person, we will walk through a, um, a scenario of getting the money invested over I'm going to say what amounts to a relatively short period of time.
[11:57] Shannon Warwick: Mm-hmm.
[11:57] Ryan Warwick: And we're gonna talk about why that is, but-
[12:00] Ryan Warwick: But we're not gonna put all the money, generally. They, they may have a different perspective and we may do it, and we take into account all, all, uh, facts and circumstances. But generally speaking, we'll say we're gonna put in 25% of the money-
[12:16] Shannon Warwick: Mm-hmm
[12:16] Ryan Warwick: ... right now.
[12:18] Shannon Warwick: Okay.
[12:18] Ryan Warwick: Okay? Um, now generally speaking, that is not invested 100% in stocks. We're, we're going to have that invested in, in stocks and bonds.
[12:31] Shannon Warwick: Mm-hmm.
[12:31] Ryan Warwick: Um, again, d- depending on their goals and needs and risk tolerance a- and, and likely some cash. So let's, for the sake of argument, we're just gonna put half of it into stocks and half of it into, uh, bonds. So 25% of the money-
[12:48] Shannon Warwick: Mm-hmm
[12:48] Ryan Warwick: ... goes in on day one. We are going to then, uh, say in three months from now, we're going to put the next 25% in.
[12:57] Shannon Warwick: Right.
[12:58] Ryan Warwick: And-
[12:58] Shannon Warwick: So now we're up to our knee
[12:59] Ryan Warwick: ... now, now we're, you know, we're half in. Now we're y- another three months-
[13:04] Shannon Warwick: Okay
[13:05] Ryan Warwick: ... gonna put another 25% in.
[13:07] Shannon Warwick: Up to our waist.
[13:08] Ryan Warwick: And then another three months, we're gonna put another 25-
[13:11] Shannon Warwick: Up to our neck. Okay
[13:11] Ryan Warwick: ... so from day one-
[13:13] Shannon Warwick: Mm-hmm
[13:13] Ryan Warwick: ... if we do that pattern, four investments over actually nine months, not 12 months.
[13:19] Shannon Warwick: Mm-hmm.
[13:19] Ryan Warwick: Right?
[13:20] Shannon Warwick: Yeah.
[13:20] Ryan Warwick: Today was day one, and then we... We're fully invested-
[13:23] Shannon Warwick: Mm-hmm
[13:24] Ryan Warwick: ... to the target allocation, in this case-
[13:28] Shannon Warwick: Mm-hmm
[13:28] Ryan Warwick: ... mix of 50% stock, 50% bonds-
[13:31] Shannon Warwick: Mm-hmm
[13:32] Ryan Warwick: ... over nine months.
[13:33] Shannon Warwick: Okay.
[13:35] Ryan Warwick: And
[13:36] Ryan Warwick: part of the discussion then is,
[13:40] Ryan Warwick: uh, is, well, th- there are kind of two other things. If between now and three months from now when that next purchase is going to happen, markets drop, and when I say markets, we're really focused on the equity side. If they drop
[14:00] Ryan Warwick: 7, 10, 15% or so,
[14:04] Ryan Warwick: we could only be two weeks out from this purchase. We're gonna go put that next purchase in. So we're, we will accelerate-
[14:11] Shannon Warwick: Accelerate our timeline. Okay
[14:12] Ryan Warwick: ... because what we're doing there is we're getting, the market is giving us an opportunity to buy stocks on sale.
[14:19] Shannon Warwick: I was just gonna say, it's the big sale.
[14:20] Ryan Warwick: Yeah.
[14:21] Shannon Warwick: Yeah.
[14:21] Ryan Warwick: So, so there it is. Now, from, we've seen markets go down much deeper than 15%-
[14:28] Shannon Warwick: Mm. Mm-hmm
[14:28] Ryan Warwick: ... so if they keep going, guess what? We're accelerating that.
[14:31] Shannon Warwick: Right.
[14:31] Ryan Warwick: If they keep going, we're accelerating that. And so while
[14:35] Ryan Warwick: at, at first blush you might think, oh, well that sounds, gosh, what a, what a horrible time to start investing-
[14:41] Shannon Warwick: Mm-hmm
[14:41] Ryan Warwick: ... I would say arguably
[14:45] Ryan Warwick: that is long-term a better scenario for that investor-
[14:48] Shannon Warwick: Mm-hmm
[14:48] Ryan Warwick: ... than if the market stayed equal for the whole nine months, and you over nine months bought, uh, four different purchases-
[14:57] Shannon Warwick: Mm-hmm
[14:57] Ryan Warwick: ... at the same price.
[14:59] Shannon Warwick: No, I, I agree.
[14:59] Ryan Warwick: You're, you're better off over nine months having purchased lower and lower prices.
[15:03] Shannon Warwick: Do you find that there's a lot of pushback though for people who are new-
[15:06] Ryan Warwick: Not really
[15:07] Shannon Warwick: ... to- Okay.
[15:07] Ryan Warwick: Yeah.
[15:08] Shannon Warwick: Okay.
[15:08] Ryan Warwick: And the reason is I think we've educated them up to this point and, and we walk through this process, and they can fundamentally then see,
[15:17] Ryan Warwick: oh, wow, if the market drops, which historically and globally people see that as bad and scary-
[15:26] Shannon Warwick: Mm-hmm. Mm-hmm
[15:27] Ryan Warwick: ... I now have the perspective, the mindset, hopefully the mindset shift has been made that-
[15:32] Shannon Warwick: Right
[15:33] Ryan Warwick: ... wow, I, that's actually a benefit to me. I'm buying-
[15:36] Shannon Warwick: Exactly
[15:37] Ryan Warwick: ... cheaper shares. That, that's going to help me in the long term.
[15:41] Shannon Warwick: Exactly.
[15:41] Ryan Warwick: It may not feel entirely emotionally good, although I would argue that most people
[15:49] Ryan Warwick: when this starts to happen are like, "Oh, great, we get to buy shares cheaper than, than they were."
[15:55] Shannon Warwick: Yeah.
[15:56] Ryan Warwick: A- and, um, so that, that's one scenario, and we can m- maybe wrap back to that later. Um, and, and that certainly has happened, uh, many times over my career as we've been averaging people in. And again, nine months, relatively short period of time.
[16:13] Shannon Warwick: No, exactly.
[16:13] Ryan Warwick: Um, we get to the end of nine months.
[16:17] Ryan Warwick: We're fully invested to the goal of 50/50.
[16:21] Shannon Warwick: Mm-hmm.
[16:23] Ryan Warwick: Now the market drops. Here's the other conversation we have before we've even put dollar one in.
[16:29] Shannon Warwick: Mm-hmm.
[16:31] Ryan Warwick: We still have half of the portfolio not exposed to stocks.
[16:36] Shannon Warwick: Mm-hmm.
[16:38] Ryan Warwick: Great. We're still excited.
[16:39] Shannon Warwick: Mm-hmm.
[16:40] Ryan Warwick: So we still get-
[16:41] Shannon Warwick: Yeah, yeah
[16:41] Ryan Warwick: ... to use the market's volatility to our advantage.
[16:44] Shannon Warwick: Absolutely.
[16:45] Ryan Warwick: And so, th- you know, I gave a, in my opinion, a fairly conservative example there, but even if we started out and said our goal is 70 stock, 30 bonds-
[16:55] Shannon Warwick: Mm-hmm
[16:55] Ryan Warwick: ... or 80 stock, 20 bonds-
[16:57] Shannon Warwick: Mm-hmm
[16:57] Ryan Warwick: ... we generally at the end when we're fully invested, we still have dry powder to go put to work when the market gives us opportunity.
[17:08] Shannon Warwick: No, exactly, and I think it's a good segue into the next, um, point, investor psychology. So, which is what we're talking about.
[17:18] Ryan Warwick: Yeah.
[17:18] Shannon Warwick: So is DCA essentially a behavioral tool?
[17:21] Ryan Warwick: Yep.
[17:22] Shannon Warwick: Uh, or a behavioral strategy? Um, and is it a risk management strategy? And I think you've answered that really quite well. Maybe you, you wanna-
[17:30] Ryan Warwick: Yeah, I, I mean-
[17:31] Shannon Warwick: ... wrap around a little bit more?
[17:32] Ryan Warwick: Before we started this, before we started filming, I, I think I made the, the comment the only benefit of DCA or dollar cost averaging is an emotional benefit.
[17:43] Shannon Warwick: Yeah. Yeah.
[17:44] Ryan Warwick: And we can, we'll, we'll tease on that, uh, or, or pull that thread a little more. Um, but I like to say
[17:52] Ryan Warwick: my greatest value to you as, as a client is to be an emotional barrier between you and your money.
[18:01] Shannon Warwick: Mm-hmm.
[18:02] Ryan Warwick: And if a tool like averaging in over nine months and talking through the strategies of how we will behave when the markets do this or that,
[18:17] Ryan Warwick: I am emotionally preparing you-
[18:20] Shannon Warwick: Mm-hmm
[18:20] Ryan Warwick: ... for what is to come. And, and so in that sense, dollar cost averaging is a phenomenal benefit. Because-
[18:31] Shannon Warwick: Mm-hmm
[18:31] Ryan Warwick: ... left out on your own, you, you just inherit money and now I, I've never done this.
[18:36] Shannon Warwick: Mm-hmm.
[18:37] Ryan Warwick: I go out to some, uh, you know, some investment firm where I can invest on my own.
[18:42] Shannon Warwick: Hmm. Right.
[18:44] Ryan Warwick: Nobody's guiding me. Nobody's talking me through market history. Nobody's talking me through strategy of-
[18:51] Shannon Warwick: There's no good counsel
[18:52] Ryan Warwick: ... of what to expect-
[18:53] Shannon Warwick: Mm-hmm
[18:53] Ryan Warwick: ... how to behave-
[18:55] Shannon Warwick: Yeah
[18:55] Ryan Warwick: ... and, and why we should be excited when the market does what fundamentally most people think is a negative thing, and that is to go down.
[19:02] Shannon Warwick: Mm-hmm.
[19:03] Ryan Warwick: But the reality is we know markets go down.
[19:05] Shannon Warwick: Mm-hmm.
[19:05] Ryan Warwick: They go down with phenomenally great regularity.
[19:09] Shannon Warwick: Mm-hmm.
[19:10] Ryan Warwick: Each and every year
[19:12] Ryan Warwick: markets drop, uh, so on average we, we see a, uh, a correction, so this is the, uh, the technical term in the market. A c- a 10% drop from high to some point is called a correction.
[19:26] Shannon Warwick: Mm-hmm.
[19:27] Ryan Warwick: On average we see that every single calendar year.
[19:30] Shannon Warwick: Mm-hmm.
[19:31] Ryan Warwick: We see 5% drops with great regularity, you know, far more often than, than annually. So
[19:39] Ryan Warwick: whenever you invest, you're, you're going to experience some level of downside. Now, the, the bear markets, y- we've, we've talked about this, but, um, 20% drops or more-
[19:51] Shannon Warwick: Mm-hmm
[19:51] Ryan Warwick: ... happen about once every five years, so less frequent, but I would stay s- say still common.
[19:57] Shannon Warwick: Mm-hmm.
[19:58] Ryan Warwick: And so what happens if, if you're out there on your own, you invest for the first time. You, you invest in such a way that, "Hey, I'm gonna go, uh, to XYZ online firm because it's free or it's cheap or... " And, and now all of a sudden I go through a bear market on my own, boy, that's a, that's a different experience. Um, so we think that there's a great emotional, um, benefit,
[20:26] Ryan Warwick: uh, and that emotional benefit can be, you know, uh, maybe also called very educational benefit-
[20:32] Shannon Warwick: Mm-hmm
[20:32] Ryan Warwick: ... to, um, walking through this process. Um,
[20:37] Ryan Warwick: I do wanna say, though, if it was, if, if we could put emotions aside.
[20:41] Shannon Warwick: Mm-hmm.
[20:42] Ryan Warwick: So if, if we could say, "Hey, we're, we're, um... " And, and this is the,
[20:48] Ryan Warwick: this is why so many of the financial
[20:52] Ryan Warwick: theories, uh, and, and the models that, that people might read about in textbooks are really, um, somewhat flawed i- is because they assume that investors are rational, not emotional beings.
[21:07] Shannon Warwick: Yeah.
[21:07] Ryan Warwick: Right? So for the moment, I'm just gonna say we are a rational being, like all the textbook models predict.
[21:13] Shannon Warwick: Yeah.
[21:14] Ryan Warwick: You would-
[21:15] Shannon Warwick: You would
[21:15] Ryan Warwick: ... there would be no argument for dollar cost averaging, and here's why. The market tends to go up over time, and so generally or on average, when we average in over time, we will tend to be buying more expensive shares throughout time. So what does that mean? It means that we're better off as investors to invest money when we have it.
[21:42] Shannon Warwick: Mm-hmm.
[21:42] Ryan Warwick: I even think that while I'm always, um,
[21:49] Ryan Warwick: I don't know if 'made fun of' is the right word, but, you know, I'm always the one with quotes, but you have a quote today.
[21:54] Shannon Warwick: Well, I do, and I, I, I, it's funny that you just said that because, um, that's my quote. So r- did you, did you read my notes and then borrow my quote?
[22:06] Ryan Warwick: I don't need to borrow your quote.
[22:07] Shannon Warwick: Oh, I see. Okay.
[22:08] Ryan Warwick: But, um, but I did read your notes.
[22:10] Shannon Warwick: You did? Okay. Excellent. Good job. So Nick Murray,
[22:14] Shannon Warwick: he's a big proponent of utilizing sys- uh, systematic, consistent-
[22:18] Ryan Warwick: An industry consultant that we read.
[22:20] Shannon Warwick: Yes
[22:21] Ryan Warwick: ... so.
[22:21] Shannon Warwick: Um, systematic, consistent investing, and he says, quote, "The best time to invest in equities is whenever you have the money." And you just used that same language. "It is the patient, disciplined equity accumulator looking neither to the left at economic events nor to the right at market gyrations who achieves his lifetime goals."
[22:40] Ryan Warwick: Yep.
[22:40] Shannon Warwick: So while that quote isn't specifically regarding DCA, the, the ideas align.
[22:46] Ryan Warwick: Yep.
[22:46] Shannon Warwick: Yeah. Do you agree with him? And I, the answer is yes.
[22:49] Ryan Warwick: Yeah. Y- y- yes, and, and let's just, um, run through that, uh, i- in more detail. So,
[22:58] Ryan Warwick: um,
[23:00] Ryan Warwick: best time to invest, whenever you have the money. So back to our two big buckets of, of-
[23:05] Shannon Warwick: Mm-hmm
[23:05] Ryan Warwick: ... you know, the, the retirement plan buckets or IRAs, 401 s. I'm investing when I have the money.
[23:11] Shannon Warwick: Mm-hmm.
[23:12] Ryan Warwick: To his point,
[23:14] Ryan Warwick: I'm averaging and I'm investing when I have the money.
[23:17] Shannon Warwick: Mm-hmm.
[23:17] Ryan Warwick: Because when that money is pulled out of my paycheck is the first moment I can invest the money.
[23:23] Shannon Warwick: Right.
[23:23] Ryan Warwick: So I am following this logic. And in that sense, we're still averaging in. So
[23:29] Ryan Warwick: f- what he's saying here, though, is, "Hey, you should invest. If you get an inheritance-
[23:35] Shannon Warwick: Mm-hmm
[23:35] Ryan Warwick: ... logically, returns-based, uh, answer is, uh, if you want the best return, because markets generally go up, you should invest the money on, on day one.
[23:47] Shannon Warwick: Mm-hmm.
[23:48] Ryan Warwick: And close your eyes-... and not look to the r- right, what does he say?
[23:51] Shannon Warwick: Yeah. You got it.
[23:52] Ryan Warwick: To the right at economics, or to the left at economic events, nor to the right at market gyrations. So what is he saying there? Something we've talked about on, on previous episodes, which is
[24:04] Ryan Warwick: we, uh-
[24:07] Ryan Warwick: Our investing methodology is designed to get people
[24:16] Ryan Warwick: educated, and knowledgeable, uh, and emotionally disciplined-
[24:20] Shannon Warwick: Mm-hmm
[24:21] Ryan Warwick: ... so that they don't try to, uh, or buy into the illusion of market timing-
[24:27] Shannon Warwick: Right
[24:27] Ryan Warwick: ... or the illusion of investment selection.
[24:29] Shannon Warwick: Right.
[24:30] Ryan Warwick: So he's saying, "Don't try to time the markets," and, you know, if you're looking at economic events-
[24:35] Shannon Warwick: Mm-hmm
[24:35] Ryan Warwick: ... um, you're really trying to-
[24:36] Shannon Warwick: You're listening to the noise
[24:37] Ryan Warwick: ... you're trying to find the best companies, right?
[24:39] Shannon Warwick: Mm-hmm.
[24:40] Ryan Warwick: So what he's saying is don't... Th- those are turning to the left and to the right.
[24:44] Shannon Warwick: Mm-hmm.
[24:45] Ryan Warwick: You need to stay focused on and, and ignore what we called the siren song of-
[24:51] Shannon Warwick: Yeah
[24:51] Ryan Warwick: ... out performance.
[24:52] Shannon Warwick: Yeah.
[24:52] Ryan Warwick: Right? The massive siren th- every... Hey, we all want to outperform. I get it. I, I want to outperform.
[24:59] Shannon Warwick: Yeah.
[24:59] Ryan Warwick: But if, if the goal or the drive to outperform ends up pulling me away f- and, and chasing, you know, market timing or chasing investment selection-
[25:12] Shannon Warwick: Mm-hmm
[25:13] Ryan Warwick: ...
[25:14] Ryan Warwick: um, which is, uh, why some people
[25:21] Ryan Warwick: will not invest their money on day one-
[25:24] Shannon Warwick: Mm-hmm
[25:24] Ryan Warwick: ... or even over what we, we say, "Hey, we're gonna average in over nine months."
[25:28] Shannon Warwick: Mm-hmm.
[25:29] Ryan Warwick: That's still a very short period of time if we're talking about somebody who has a, a 30 or 40-year investment horizon.
[25:36] Shannon Warwick: Right.
[25:36] Ryan Warwick: We're, we're getting it, we're really getting it invested inside of a year.
[25:39] Shannon Warwick: Mm-hmm.
[25:40] Ryan Warwick: Um, and so
[25:43] Ryan Warwick: I just think it's, it, it really lines up with our philosophy from, from anoth- a number of, um, angles or on a number of levels. But we're gonna go into a little bit of, like, market comment and, and some numbers and percentages and stats.
[26:00] Shannon Warwick: Yeah.
[26:00] Ryan Warwick: No investment advice per se.
[26:03] Shannon Warwick: Right.
[26:03] Ryan Warwick: And so nothing we say on this podcast can be construed as advice.
[26:08] Shannon Warwick: Mm-hmm.
[26:08] Ryan Warwick: Uh, and we, we're not, um, able to give advice, uh, unless, uh, at all unless somebody has a, a signed client contract with us. So I just wanna get that out there before I dive into-
[26:20] Shannon Warwick: Yeah
[26:20] Ryan Warwick: ... some of these slides-
[26:21] Shannon Warwick: For sure
[26:21] Ryan Warwick: ... charts.
[26:22] Shannon Warwick: Really
[26:22] Ryan Warwick: I'm gonna talk about them, but, and then they're gonna be available, um-
[26:26] Shannon Warwick: Right. We'll link these
[26:27] Ryan Warwick: ... on the on- we will link them to the podcast.
[26:29] Shannon Warwick: Absolutely.
[26:31] Shannon Warwick: Okay.
[26:32] Ryan Warwick: So fundamentally what, what he's saying in this quote and what I said,
[26:37] Ryan Warwick: that, hey, when is the best time to invest? Do you average in over years?
[26:41] Shannon Warwick: Mm-hmm.
[26:41] Ryan Warwick: Uh, now I'm assuming you have a lump sum to invest. Or do you, uh, or do you put it in, in today and, and close your eyes? And, um, and, and the reason somebody would say
[26:56] Ryan Warwick: put it all in today is because, as I alluded to earlier, the market tends to go up over time, and we all fundamentally know that.
[27:08] Ryan Warwick: But here are some of the statistics.
[27:12] Ryan Warwick: So
[27:14] Ryan Warwick: here is a, a fun chart we'll put out there. But, um, this just shows in, in a greenish blue the, um, e- every year is a box, and green are years that the market's been positive, red are years when the market's been negative.
[27:30] Shannon Warwick: Mm-hmm.
[27:30] Ryan Warwick: Well, basically the market is positive, and, and when I use the market here we're talking, uh, US markets, generally speaking large companies, um,
[27:43] Ryan Warwick: is, uh, up 75% of the time.
[27:47] Shannon Warwick: Mm.
[27:47] Ryan Warwick: Okay? So if we just said on January 1st at any, any moment, we have a 75% chance that in 12 months it's higher. So
[27:57] Ryan Warwick: are we better off investing over the course of that year or two or three years? No, because-
[28:04] Shannon Warwick: Right
[28:04] Ryan Warwick: ... generally speaking, we will be buying more expensive shares. And I wrote down some scenarios that we will put up there for people to see just very simply-
[28:14] Shannon Warwick: Oh, that's great
[28:15] Ryan Warwick: ... uh, how, how we're, uh, describing this. So,
[28:19] Ryan Warwick: um,
[28:22] Ryan Warwick: i- over, y- you know, that's, that's every year. This is another way of looking at it. Um-
[28:26] Shannon Warwick: So, so then the question of does a lump sum versus DCA generally yield better returns?
[28:32] Ryan Warwick: M- a lumps, a, a lump sum i- if looking at it over any reasonable period of time, a lump sum would tend to generate better returns-
[28:42] Shannon Warwick: Mm-hmm
[28:42] Ryan Warwick: ... because the market tends to be going up. And so the earlier you have money invested in that process of the market growing, the more money you will accumulate.
[28:53] Shannon Warwick: Mm.
[28:53] Ryan Warwick: That being said-
[28:54] Shannon Warwick: If that sits in the pit of my stomach and I can't bring myself to do that-
[28:59] Ryan Warwick: Then, then we still want to be long-term investors, and let's find a way to get invested-
[29:05] Shannon Warwick: Mm-hmm
[29:05] Ryan Warwick: ... so that you can emotionally do it-
[29:08] Shannon Warwick: Mm-hmm
[29:09] Ryan Warwick: ... and you have emotional staying power.
[29:11] Shannon Warwick: Yeah.
[29:12] Ryan Warwick: Because look, i- as, as we've said before, the... We, we look at it from two perspectives. There's l- there's logistics. You know, we start of course with, as we talked about, goals and, and having a plan and, and then we put together a portfolio. So w- we need to know all that. But
[29:28] Ryan Warwick: we, um, look at logistics.
[29:31] Shannon Warwick: Mm-hmm.
[29:31] Ryan Warwick: Okay? Logistics is, um, one side of, of our decision on how we go and put money, uh, to work for people, and logistics includes things like averaging in, things like what do we end up with as, as a stock to bond or stock bond cash portfolio, uh, because we need to know how much money people might need to draw on this.
[29:53] Shannon Warwick: Mm-hmm.
[29:54] Ryan Warwick: Um, and then there's emotions.
[29:56] Shannon Warwick: Mm-hmm.
[29:56] Ryan Warwick: So we're gonna look at it from both sides. And so the emotional side is, is something we will never ignore. So we can tell you all day long that the best thing is to put all of this money to work today.
[30:07] Shannon Warwick: You're never, you, you... Yeah.
[30:08] Ryan Warwick: But if I'm gonna get you to be a, an investor over 30 or 40 years- I'll take in averaging in for a couple years so that we can do that for a long time.
[30:17] Shannon Warwick: Well, you need to average in the humanity-
[30:19] Ryan Warwick: Yes
[30:19] Shannon Warwick: ... because it's, you're not getting away from that.
[30:22] Ryan Warwick: No. So then we, then we go here and we look at, you know, how often, uh, is the market up, um, over five-year periods? And, um,
[30:35] Ryan Warwick: a- and in this case, I'm looking at did the market outperform treasury bills? So, um, not just was the market above zero, but did it outperform what otherwise we could have the money in perfectly, you know, safe. Uh, and I, when I say perfectly safe, I mean, look, a treasury bill is a guaranteed investment backed by the US government.
[31:00] Shannon Warwick: Mm-hmm.
[31:01] Ryan Warwick: And, uh, jokingly like to say, "If that's not safe, if the government goes away and you don't get paid back on your treasury bill, let's not worry about our money."
[31:09] Shannon Warwick: Yes.
[31:09] Ryan Warwick: Something else is going on. So, uh-
[31:11] Shannon Warwick: We're all in this together
[31:13] Ryan Warwick: ... you know, and so over five years that, that percentage is, is very, very high. Um, and then over 10 years it's even higher. In, in fact, if I think about rolling 10-year periods going back to, um,
[31:29] Ryan Warwick: like, uh, the 1920s-
[31:31] Shannon Warwick: Mm-hmm
[31:31] Ryan Warwick: ... so we're, we're at about 100 periods of time.
[31:34] Shannon Warwick: Mm-hmm.
[31:34] Ryan Warwick: I mean, I can think of, uh, so this isn't a, a pure statistical number, but I can think of three or four 10-year periods out of many-
[31:45] Shannon Warwick: Mm-hmm
[31:46] Ryan Warwick: ... that, that over 10 years that the market hasn't been higher. Okay,
[31:51] Ryan Warwick: so then when we start talking about averaging in, you know, if you have a, a reasonable investment horizon, you're better off getting the money put to work. We just have to take some of these other factors into consideration-
[32:04] Shannon Warwick: Mm-hmm
[32:04] Ryan Warwick: ... um, because we are human and we have emotions, and so-
[32:09] Shannon Warwick: Absolutely.
[32:10] Ryan Warwick: Um-
[32:10] Shannon Warwick: So then does DCA help fight against the illusion of market timing, was my next question.
[32:17] Ryan Warwick: Yeah.
[32:18] Shannon Warwick: Or can it be restrictive if you are comfortable with taking more risk?
[32:22] Ryan Warwick: Yeah. I, I think that's a, a great question. Does it help with fighting, um, the desire to time the market?
[32:32] Ryan Warwick: Yes, because, um,
[32:36] Ryan Warwick: often
[32:38] Ryan Warwick: what
[32:40] Ryan Warwick: drives people is, especially that new investor, right?
[32:45] Shannon Warwick: Mm-hmm.
[32:46] Ryan Warwick: Is, is fear. I mean, no doubt people who have not been investors have still heard about markets, they've read news articles, they've, they've seen, um, they've seen the headlines. They, they hear economists-
[32:58] Shannon Warwick: Well, and they may have experienced something, um, in their childhood-
[33:01] Ryan Warwick: Sure
[33:01] Shannon Warwick: ... that's really f- been frightening for them.
[33:04] Ryan Warwick: Yeah.
[33:04] Shannon Warwick: Yeah, yeah.
[33:06] Ryan Warwick: So
[33:09] Ryan Warwick: the choice sometimes is
[33:12] Ryan Warwick: not
[33:14] Ryan Warwick: should I invest, and I'm not saying this is our driving choice, I'm saying sometimes people out there will be thinking, "Should I start to dip my toe in?"
[33:23] Shannon Warwick: Mm-hmm, mm-hmm.
[33:25] Ryan Warwick: "Or should I wait for the market to drop?"
[33:28] Shannon Warwick: Mm-hmm.
[33:28] Ryan Warwick: Okay, so it's not, they're not even asking the question, "Should I put it all in today or should I average it in?"
[33:37] Shannon Warwick: Well, and I'll-
[33:37] Ryan Warwick: And they might be saying-
[33:39] Shannon Warwick: I'll be really-
[33:39] Ryan Warwick: ... "Should I be waiting until it's safe again?"
[33:41] Shannon Warwick: I'll be really honest and vulnerable and use myself as an example.
[33:44] Ryan Warwick: Yeah.
[33:44] Shannon Warwick: If I didn't have you-
[33:45] Ryan Warwick: Yep
[33:46] Shannon Warwick: ... um, you're my advisor, I've said that how many times on the podcast,
[33:51] Shannon Warwick: and I, I love, um, having these conversations with you. I've learned so much, but man, if I didn't have, ha- have you in my ear and have these conversations with you and be diving in and learning and all of that, I would be, I would be one who would say, "Ugh, I wanna wait for the big sale. I don't wanna do this."
[34:12] Ryan Warwick: Yeah.
[34:12] Shannon Warwick: You know? Or I, it's just not safe.
[34:14] Ryan Warwick: Yeah.
[34:15] Shannon Warwick: I, I, I would, I really think that I would, and I think that I would say, "Ooh, I think I just need to dip my toe. Okay, now I think..." I would be very hesitant.
[34:23] Ryan Warwick: Yeah.
[34:24] Shannon Warwick: I'm just being honest.
[34:25] Ryan Warwick: Yep.
[34:26] Shannon Warwick: And maybe there's somebody out there who that really kind of
[34:32] Shannon Warwick: it- they can understand that, they feel the same way. That's resound, that resounds with them too, I don't know.
[34:36] Ryan Warwick: Sure. I, I mean, I think
[34:39] Ryan Warwick: that is
[34:41] Ryan Warwick: rational.
[34:42] Shannon Warwick: Mm-hmm.
[34:43] Ryan Warwick: Um, we want people to recognize that that's normal.
[34:47] Shannon Warwick: Mm-hmm.
[34:47] Ryan Warwick: I, I don't think it's normal for people to just
[34:51] Ryan Warwick: say, "Yeah, I'll, I'll put it in, not worry about it."
[34:56] Shannon Warwick: It's not. It's new.
[34:57] Ryan Warwick: No, it takes-
[34:57] Shannon Warwick: I don't think-
[34:57] Ryan Warwick: Yeah. It, we've been conditioned by everything we see that, um, you know, because the news,
[35:05] Ryan Warwick: the financial media is out there to sell a story, to keep eyeballs on TV, and how do they do that? They, they create, uh, they make inflammatory or emotionally charged statements and-
[35:17] Shannon Warwick: Yeah, absolutely
[35:17] Ryan Warwick: ... they get people, uh, in fight or flight. They, they, you know,
[35:23] Ryan Warwick: excited one day and, and desperate to, to have safety the next. So yeah, it's, it's a, I wanna, um,
[35:32] Ryan Warwick: keep going down this path though. So it really for many people isn't a question of do I put a lump sum in or do I average in? It's do I wait, or maybe I start dipping my toe in a little bit.
[35:44] Shannon Warwick: Mm-hmm.
[35:44] Ryan Warwick: And so for that,
[35:49] Ryan Warwick: um,
[35:51] Ryan Warwick: for that person,
[35:53] Ryan Warwick: when we describe dollar cost averaging and, and we put it in in this very disciplined, systematic way over what amounts to a relatively short period of time-
[36:00] Shannon Warwick: Mm-hmm
[36:02] Ryan Warwick: ... that is absolutely helping them to avoid the illusion of market timing.
[36:09] Shannon Warwick: Mm-hmm.
[36:09] Ryan Warwick: And I'll give you a,
[36:11] Ryan Warwick: an example from, from the past, um, where, where I was working with somebody, and-
[36:19] Ryan Warwick: They had had, uh, an exit from a company.
[36:23] Shannon Warwick: Mm.
[36:23] Ryan Warwick: This was, uh, over...
[36:26] Ryan Warwick: Yeah, it was about, um, I wo- I would say it was about 2012. And so if you remember that time, uh, okay, so I'm just gonna draw what the markets did
[36:39] Ryan Warwick: in, uh, in the mid 2000s.
[36:41] Shannon Warwick: Okay.
[36:43] Ryan Warwick: So
[36:44] Ryan Warwick: they were moving along quite nicely. We get to about
[36:51] Ryan Warwick: October, if I'm not mistaken, October of 2008 was a peak, and we'll come back to that. I have another, uh, article that, that's fun to talk about relative to that. A- and, and this was, y- housing was going, you know, booming, and then this was, um, the, the peak of the market before what is now known as the Great Recession, which when... So now I get to use red. So we go down, uh, into, um, a, a deep, dark, uh-... recession. This was-
[37:26] Shannon Warwick: Mm
[37:26] Ryan Warwick: ... this was not a fun time.
[37:28] Shannon Warwick: No.
[37:28] Ryan Warwick: You remember it as, as the spouse of-... somebody, um-
[37:32] Shannon Warwick: Yes
[37:32] Ryan Warwick: ... living through it at work every day.
[37:34] Shannon Warwick: Yes, I do.
[37:34] Ryan Warwick: Um, tough conversations.
[37:37] Shannon Warwick: Yes.
[37:37] Ryan Warwick: Um, the, the S&P 500, um, was down from October of '08, finally bottomed
[37:47] Ryan Warwick: around
[37:49] Ryan Warwick: 2009. And this might have been 2007, so I'm gonna just say it was '07 or '08. I, I just can't recall from memory. But n- needless to say, we, we went down about, it was over 50%. So, uh, it was about 58%. Okay. M- Regardless of what the time period was,
[38:12] Ryan Warwick: boy, that's emotional.
[38:14] Shannon Warwick: It was.
[38:15] Ryan Warwick: And, and there was, at that time, not many places to hide. The only, the only thing that kind of stayed solid were government bonds because everyone rushed to the safest, uh, investment in the world in this moment of everything's going under. Okay, so
[38:33] Ryan Warwick: then, then we came out of this, and it was a pretty good, uh,
[38:39] Ryan Warwick: pretty good return, um, you know, out of the bottom. Market, market performed. And so I was having this conversation, you know, sometime in, in 2012. And I only draw that to give people this framework for where were we when this conversation was occurring. So we had gone through this
[39:01] Ryan Warwick: period, uh, of years that was really tough.
[39:05] Shannon Warwick: Mm.
[39:06] Ryan Warwick: And, and so this person, um,
[39:09] Ryan Warwick: has a, uh, a liquidity event at, at work.
[39:13] Shannon Warwick: Mm-hmm.
[39:14] Ryan Warwick: Um, and at that time, they,
[39:17] Ryan Warwick: they had a, a relationship, um, with a firm, and this firm was back east.
[39:23] Shannon Warwick: Mm.
[39:24] Ryan Warwick: And they brought, um... They, they took them half of the money and, and took, uh, and, and, uh, were introduced to us and, and brought half the money here.
[39:34] Shannon Warwick: Mm-hmm.
[39:35] Ryan Warwick: Um, s- kind of a separate issue, but we, we very rarely will do that because what we find is that
[39:46] Ryan Warwick: neither advisor, and the only way I said I would do this, uh, where the money was split, was if I am your trusted advisor-
[39:54] Shannon Warwick: Mm
[39:55] Ryan Warwick: ... and you are, y- you take our advice, we're doing the planning.
[39:59] Shannon Warwick: Sure.
[39:59] Ryan Warwick: Right. And
[40:03] Ryan Warwick: so we-
[40:04] Shannon Warwick: How, how-
[40:04] Ryan Warwick: We, yep
[40:05] Shannon Warwick: ... back up a little bit. How shell-shocked was this particular client after going through-
[40:10] Ryan Warwick: Well, okay, so what I'm... I'm just saying the market, this is what recent history had looked like.
[40:16] Shannon Warwick: Exactly.
[40:16] Ryan Warwick: But they didn't have new... They didn't have the money until here. So-
[40:20] Shannon Warwick: Okay
[40:20] Ryan Warwick: ... so they're, we're now starting over-
[40:22] Shannon Warwick: But e- but everybody experience, but everybody experienced pain
[40:26] Ryan Warwick: ... That's right.
[40:27] Shannon Warwick: So, so they, I'm assuming, had a bad taste in their mouth and had some... Did they come in with-
[40:31] Ryan Warwick: This was just informing their psyche. Right.
[40:34] Shannon Warwick: E- exactly.
[40:34] Ryan Warwick: It, it wasn't-
[40:34] Shannon Warwick: So were they a little jaded regarding markets? Were they a little...
[40:38] Ryan Warwick: Possibly.
[40:39] Shannon Warwick: Okay.
[40:39] Ryan Warwick: Um,
[40:41] Ryan Warwick: it's, uh...
[40:45] Ryan Warwick: Y- I mean, look, everyone was.
[40:47] Shannon Warwick: I know.
[40:47] Ryan Warwick: So, yeah.
[40:47] Shannon Warwick: That's what I mean. Everyone.
[40:49] Ryan Warwick: Um, it's not, but it's not jaded. It-
[40:51] Shannon Warwick: Uh.
[40:51] Ryan Warwick: I mean,
[40:53] Ryan Warwick: we had plenty of people here who, you know, while it turned their guts a little bit-
[40:58] Shannon Warwick: Yeah
[40:58] Ryan Warwick: ... said this is a generational opportunity to invest-
[41:02] Shannon Warwick: Okay
[41:02] Ryan Warwick: ... in- invest money.
[41:03] Shannon Warwick: Mm-hmm.
[41:03] Ryan Warwick: So, um, if, if you had the right mindset, it was, it was and has proven out over a long period of time.
[41:11] Shannon Warwick: Mm-hmm.
[41:11] Ryan Warwick: Hard to believe we're now from the bottom of the financial crisis, we're 17 years in.
[41:19] Shannon Warwick: It's just-
[41:19] Ryan Warwick: Crazy
[41:20] Shannon Warwick: ... crazy.
[41:20] Ryan Warwick: And we've seen some of the strongest market returns in history.
[41:24] Shannon Warwick: Phenomena.
[41:25] Ryan Warwick: So, so this person is sitting here with some new money.
[41:27] Shannon Warwick: Mm-hmm.
[41:27] Ryan Warwick: Takes half to somebody back east, half to us.
[41:31] Shannon Warwick: Mm-hmm.
[41:32] Ryan Warwick: And we talk through, we do planning, we talk about our process. This is informing us, "Look, m- the market's barely above where it was four or five years ago."
[41:43] Shannon Warwick: Mm-hmm.
[41:45] Ryan Warwick: Yeah, it's up from the bottom. W- we think it's an w- w- we still think it's an opportunity-
[41:50] Shannon Warwick: Okay
[41:50] Ryan Warwick: ... to get it to work.
[41:51] Shannon Warwick: Mm-hmm.
[41:51] Ryan Warwick: We invested that over a short period of time, as described before.
[41:55] Shannon Warwick: Mm-hmm.
[41:56] Ryan Warwick: You know, nothing, nothing fancy, you know, and, and the market continued to grow. Okay?
[42:01] Shannon Warwick: Mm-hmm.
[42:01] Ryan Warwick: So I'm not sitting here saying, "Look at our great returns." We just... Look, the, I'm telling you what the market did, and we got them into the market.
[42:09] Shannon Warwick: Right.
[42:09] Ryan Warwick: Okay?
[42:12] Ryan Warwick: The other firm said, "This
[42:18] Ryan Warwick: is not gonna last." And so we're gonna hold your money, the half that you've put, uh, with us, and it was significant, we're gonna hold it in cash. Okay?
[42:26] Shannon Warwick: No, this didn't happen. This happened.
[42:28] Ryan Warwick: This happens all the time because it's not only-
[42:33] Shannon Warwick: Wow
[42:34] Ryan Warwick: ... I'm just a-
[42:35] Shannon Warwick: Okay
[42:35] Ryan Warwick: ... layou- look, it's not only
[42:38] Ryan Warwick: laypeople, and I'm saying that, you know, non-financial professionals that are out there saying, "We're gonna time the markets."
[42:45] Shannon Warwick: Hm.
[42:46] Ryan Warwick: And so-
[42:47] Shannon Warwick: So let's talk about the-
[42:48] Ryan Warwick: 2000-
[42:48] Shannon Warwick: Yeah, let's talk about the outcomes
[42:49] Ryan Warwick: ... well, 2012-
[42:50] Shannon Warwick: Yeah
[42:50] Ryan Warwick: ... he, and he tells me this, and I say, "I, I don't think that's right." Guess what? 2015 comes along.
[42:57] Shannon Warwick: Uh-huh.
[42:57] Ryan Warwick: The market had, you know, had its gyrations, but basically the market hasn't stopped going up with intermittent periods of, of short bear markets. The market hasn't stopped going up since the bottom in 2009. So come about 2015, we've had some pretty good,
[43:16] Ryan Warwick: uh, outcomes because we've been, we got him invested over a short period of time.
[43:22] Shannon Warwick: Right.
[43:23] Ryan Warwick: Right? We averaged him in, but over our very disciplined process, which is a, an attempt to not, uh, time the market.
[43:34] Shannon Warwick: Mm-hmm.
[43:34] Ryan Warwick: Because I can't time the market.
[43:36] Shannon Warwick: Mm-hmm.
[43:36] Ryan Warwick: We just, we, we have to get in. And we know that, uh, or we believe strongly-
[43:41] Shannon Warwick: Mm-hmm
[43:42] Ryan Warwick: ... that over time, over long periods of time, this is gonna be right for you. Guess what he said to me? He calls me in 2015, "Ryan,
[43:49] Ryan Warwick: I'm still in cash over there."
[43:51] Shannon Warwick: Yeah.
[43:53] Ryan Warwick: There's the problem. Because you know what? They never got that. It never came. And that's, that's the problem that dollar cost averaging can help avoid in this endeavor to time the market.
[44:11] Shannon Warwick: Mm.
[44:12] Ryan Warwick: Because if I'm sitting around waiting
[44:16] Ryan Warwick: for the next crash, and I've had people-
[44:18] Shannon Warwick: Mm-hmm
[44:18] Ryan Warwick: ... you know,
[44:21] Ryan Warwick: person after person can come in, "Look, gosh, the market's been going up." Okay, I just, uh, you know, and they, they'll, they'll say something like, "You know, I just saw on CNBC there was an economist and they said we, we are, we're, we're gonna get a recession this year, or we're gonna get a market, a bear market with a, you know, high probability, right, Ryan? The, the market has to go down this year." And I say, "No. It could."
[44:46] Shannon Warwick: But it doesn't have to.
[44:47] Ryan Warwick: But in the best of times-
[44:48] Shannon Warwick: Yeah
[44:49] Ryan Warwick: ... it could go down.
[44:49] Shannon Warwick: Yeah.
[44:50] Ryan Warwick: Right? So-
[44:50] Shannon Warwick: Sure
[44:51] Ryan Warwick: ... what's, what's interesting, um, is that this is in, in, I'm sure there are listeners out there who might even have had, you know, similar pieces of, of advice, um, and that is, "Hey, we're," or, or have tried it themselves, "We're gonna we have this money. We're gonna wait for an opportunity," and 10 years later we're still waiting. Five years later we're still waiting. You, you cannot recover those returns. So averaging in gets us invested.
[45:20] Shannon Warwick: Mm.
[45:20] Ryan Warwick: And really,
[45:22] Ryan Warwick: all success in investing, uh, uh, to be successful investors, we just need to be in the markets.
[45:28] Shannon Warwick: Right.
[45:29] Ryan Warwick: Right?
[45:29] Shannon Warwick: It, can we... That, that was great. You know, I am thinking back to, I'm thinking back to our lived experience, Ryan, is actually what I'm doing.
[45:39] Shannon Warwick: We didn't stop with the discipline, but gosh, I remember we clamped down in other areas, didn't we?
[45:49] Ryan Warwick: Yes.
[45:49] Shannon Warwick: We did. We did.
[45:54] Ryan Warwick: Because,
[45:56] Ryan Warwick: yeah, because the reality is income was significantly impacted and you have to make choices, but we kept investing.
[46:02] Shannon Warwick: We kept investing.
[46:04] Ryan Warwick: Because it's the right thing to do.
[46:05] Shannon Warwick: Mm-hmm.
[46:05] Ryan Warwick: So.
[46:07] Ryan Warwick: They get green.
[46:09] Shannon Warwick: They get green.
[46:10] Ryan Warwick: They, they invested
[46:13] Ryan Warwick: a third of the money, less than a third of the money.
[46:16] Shannon Warwick: Uh-huh.
[46:17] Ryan Warwick: And at age 65, when this person has 271-
[46:22] Shannon Warwick: Uh-huh
[46:22] Ryan Warwick: ... this person has 447,866.
[46:28] Shannon Warwick: It's so crazy.
[46:30] Ryan Warwick: I don't know
[46:32] Ryan Warwick: how to give a more powerful message to a 20-year-old.
[46:36] Shannon Warwick: Ah.
[46:36] Ryan Warwick: Because regardless of what the dollar is, if you only have $50 to invest-
[46:41] Shannon Warwick: Do it
[46:41] Ryan Warwick: ... then invest your $50.
[46:42] Shannon Warwick: Invest your 50.
[46:42] Ryan Warwick: If you, you have 10,000 to invest, invest your 10,000.
[46:45] Shannon Warwick: Yep. I just said it, you know, it just gives you permission to relax and to breathe. Letting, just letting your money work for you instead of working for your money, letting the money serve you instead of serving your money.
[46:58] Ryan Warwick: Thank you for listening to the Worth Beyond Wealth podcast. If you liked this podcast, please like, share, and subscribe. The highest compliment you could give would be sharing this with a friend. Thank you. The opinions expressed in this program are for general informational purposes only, and are not intended to provide specific advice or recommendations for any individual or any specific security. RW Investment Management, LLC, dba RW Investment Management, is a registered investment advisor. Testimonials given by current clients are not in exchange for compensation. This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where RWIM and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by RWIM unless a client service agreement is in place. RWIM is not a legal or tax advisor.