What To Do When The Market is in Correction
Sit down with Paul and Garrett of Ascend Investment Partners to learn more about what you can do during a market correction to better weather the storm.
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Sit down with Paul and Garrett of Ascend Investment Partners for a bi-weekly conversation about all things financial. Focusing on helping you plan, keep, and grow for a bright future.
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Full Transcript
00;00;06;21 - 00;00;24;09
Garrett & Paul
Hello and welcome to your investment partners with Paul and Garrett, where we talk about all things financial, focusing on helping you plan, keep and grow for a successful future. If you're new to the podcast, welcome and if you're tuning in again, welcome back and thank you for listening. Hello and welcome to the second episode of your investment partners with Paul and Garrett.
00;00;24;19 - 00;00;41;21
Garrett & Paul
Today we're going to be talking about what you can do when the market is in correction, how your long term plan can help and how you can use the market volatility to your advantage. My name is Garrett Smith and I look forward to your time with us today. Well, we're back at it. Let's talk today about what to do when the market turns down.
00;00;41;21 - 00;01;02;07
Garrett & Paul
You ready to do this again? Sure. Yeah. Let's hopefully have some answers for for this one. This is a tough one. Yeah, this is a tough one. That is something that's on everybody's mind right now, for sure. Yeah, I think the most important question is, did you get used to hearing yourself in your own headphones? No, not really.
00;01;03;01 - 00;01;29;23
Garrett & Paul
But, you know, we'll get used to it, I guess. So I think we just kind of cover the topic of what to do when the market's in a pullback. Right now. We're recording this at the end of June. And and so it's obviously top of mind for a lot of our clients and as well as ourselves. And so I guess when the market pulls back as it has been, what do you do?
00;01;31;04 - 00;01;57;15
Garrett & Paul
Well, when you told me we were going to talk about this subject, I, I started thinking about it and, you know, I've been doing this for a long time and I've always looked for the magic bullet, you know, how do we how do we avoid market losses but also participate in all the market gains? And, you know, I've looked high and low for 40 years and there just isn't any way to do it.
00;01;57;15 - 00;02;22;01
Garrett & Paul
And so the that the short I think the short answer is in a market correction, there's really only, you know, one thing to do and that is to look for bargains. So that's what we're doing right now, is just trying to find out what what is oversold, what has what's the baby that's been thrown out with the bathwater right now.
00;02;23;16 - 00;02;42;27
Garrett & Paul
And, you know, we'll get into the longer answer as to why. But that that's essentially what what we have to do, just kind of ignore the markets and look for look for opportunities right now because the market's you know, it's already corrected and nobody could see it coming or how far you know, we know the market's going to go up and down.
00;02;42;27 - 00;03;06;28
Garrett & Paul
We just don't know. How far does it go down this time? And, you know, I've heard people say, well, why don't we put in like a 10% stop loss? And so if you do that, the market goes down, you know, 10%, you sell it goes down 11%, and then the next day it goes up 4%. And so now all of a sudden you're trying to figure out when to get back in there.
00;03;06;28 - 00;03;27;13
Garrett & Paul
Just there's just not really any way to to know what's coming or when the market will bottom or when it will turn around and start going up. And and so, you know, there's just other things that you have to do to position your portfolio because we know this is going to happen over time. Yeah. Market corrections are always surprising, but they're never a surprise.
00;03;27;19 - 00;03;47;23
Garrett & Paul
Right. Right. We it's it's happened in the past. It'll happen again. You know, you expect to, you know, talk about the S&P 500, a 10% pullback every year and, you know, a 20 to 30 about every three years. Right. So there is just it's doing what it does. And I think, you know, I agree with you that you can go bargain shopping.
00;03;48;03 - 00;04;05;06
Garrett & Paul
That puts in place a lot of, you know, assumptions that have been done on the previous end. You know, assuming you own quality and you've done your diligence and you're hanging on onto, you know, high quality companies, that it's then it's worth it to buy and hold. Right. So that's I think on the long answer side that you alluded to.
00;04;05;06 - 00;04;25;18
Garrett & Paul
But but when things go on sale, you have to go look. And it's no different from the grocery store or, you know, the sporting goods store, wherever you want to go when things go on sale, you have to go looking well. And that's how you really, you know, really advance the performance of your portfolios to buy really good things at fire sale prices in all that.
00;04;25;24 - 00;04;49;26
Garrett & Paul
We've been able to do that over time. And it's it you know, it's hard to do because it's a lot easier to buy when everything is good. It sells those, you know, all those emotions of greed and fear and, you know, when things are high and going higher, it's just a lot easier to buy. I mean, everybody wanted to buy Bitcoin when it was, you know, 65,000 a coin.
00;04;49;26 - 00;05;14;26
Garrett & Paul
And now it's, you know, 19,000, 20,000. This is not a lot of buyers out there, you know. So it's it's it's the psychology of investing. And I don't know that you ever get to the point where those emotions don't have to be checked constantly. So yeah, the the emotional override, we see it in ourselves. We see it in our clients.
00;05;14;26 - 00;05;34;25
Garrett & Paul
Just when when they when it's good, it's easy to be buyer. Yeah. And when it's rough, I think the hard thing too, about when the market's down is all the headlines are terrible, right? You know, there's, there's, it's the job of the news industry to get you to come back tomorrow so they'll write plenty of headlines to make you nervous.
00;05;35;03 - 00;06;06;26
Garrett & Paul
You know, there's always a guy on TV that that basically says the market's going to zero. And then there's another guy right behind him that says the market's going to the moon. And so it's you know, it's just but that's what makes a market is the difference of differences of opinion, You know, and and the market, I guess the, you know, a blessing and a curse of the market is that it that the stock market and the bond market is there priced every second of every day.
00;06;07;02 - 00;06;31;29
Garrett & Paul
You know, your your home, you know, I mean, just think about somebody coming out and putting a sign on front of your house every day, what it's worth. And, you know, it's absurd because we don't we don't really care what our homes are worth because on a day to day basis, because we're not going to sell and we really need to kind of look at our portfolio like that as especially our stock portfolios.
00;06;31;29 - 00;06;56;03
Garrett & Paul
We buy them for growth over time and to price it, you know, every second of every day. It just kind of excuse the reason that we own good quality companies. I mean, Costco is still selling tons of, you know, groceries and, you know, knickknacks and everything else that they always sell. And they're selling it in abundance. They're probably selling more now than they did last month.
00;06;56;03 - 00;07;31;26
Garrett & Paul
And yet the stock is down. And it's just a that's just a function of the emotions of the market, the fear side of the market kicking in. And But Costco still a great company. Yeah. And they're going to be fine. Yeah. I think it leads to in that idea of how you never want to be the forced seller, you're oftentimes on the as you get into these bear markets, you hear of companies or positions, you know, hedge funds or banks that had over levered, you know, taking on too much debt and had to sell to meet some obligations.
00;07;32;09 - 00;07;47;19
Garrett & Paul
And and that's kind of what puts downward pressure on these bigger pullbacks with these bigger downturns in the market of of being a for seller. The same thing with your home. You know, you never want to be the fourth seller on your home. If you can be patient about when you want to sell and deliberately make the decision to move.
00;07;48;01 - 00;23;03;14
Garrett & Paul
And the same thing happens with stocks.
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