How to invest in a bear market? With Rick Ferri, host of the Bogleheads on Investing Podcast [004]
How do you invest during bear markets?
This is an extremely important question for any index investor, and any investor in general of course.
And this is a very relevant question today because the stock market is down 20% in the US and about 10% globally today compared to the beginning of the year.
Following COVID and now with the war in Ukraine, the world economy has slowed down. Inflation is breaking records in many countries and there are talks of an upcoming recession in most news media.
While falling stock market prices is a great opportunity for long term investors like us, it’s still hard to handle the uncertainty. It’s hard to invest when the overall expectation seems to be that it is going to continue to go down. It is especially hard for beginner investors, like the students who took my course in the past few months and only started investing recently.
To help them manage their emotions and overcome these uncertainties, I invited one of the very best people on earth to talk to us about how to invest in bear markets: Rick Ferri.
Rick Ferri is the president of the The John C. Bogle Center for Financial Literacy and host of the “Bogleheads on Investing” podcast.
He has been a financial advisor for 35 years and a pioneer of low cost investing via index mutual funds and ETFs, and low-fee investment advice and portfolio management.
He is the author of 7 investment books (including one of my favorites “All About Asset Allocation”) and hundreds of articles. Published in Forbes, the Wall Street Journal and professional journals.
He has helped thousands of index investors navigate uncertain times like the one we’re going through now.
So I was extremely happy when he accepted to join our event, despite it being during his holidays. Rick, if you’re listening to this I would like to thank you once more on behalf of the entire community.
The conversation was really insightful and it had an incredible impact on the audience.
Most of the fears and uncertainty attendees had before the event were dissipated by the no-nonsense and very clear approach of Rick.
All of us left the event with a reinforced mindset that will help us get through these uncertain times successfully.
The conversation was so good that I decided to also release it on the podcast so that the entire community can benefit from it.
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Пікірлер: 22
amazing !! Thank you for this
@SebastienAguilar
Жыл бұрын
Glad you find it useful!
Thanks for the video upload👍☺️🇦🇺 very interesting to see how others across the world are also staying the course🤛
@SebastienAguilar
Жыл бұрын
Haha, yes indeed the same principles apply everywhere!
Thank you for uploading this video!
@SebastienAguilar
Жыл бұрын
Glad you like it Koen!
Excelente ayuda para mantener el rumbo, gracias Rick Ferri.
Great lecture, great information! Thank you for this video!
@SebastienAguilar
Жыл бұрын
Glad you liked it!
Thanks a lot for all this! My favorite part: the dividend return % is far less volatile than the stock price. That put things in perspective, and make you realise that when the market goes down, it's an opportunity: you buy an asset that is cheaper with relatively equal return. And on top one day it will be much higher in stock value. Is there any data available about dividend return vs stock price in a bear market? That would make the picture complete. Thanks and keep going ;-)
@SebastienAguilar
Жыл бұрын
Yes I think this is an important part to remember indeed. And I would be interested in seeing that type of data as well! Just to be clear, note that dividends aren't anything magical. When you get a distribution, the share price goes down by an equivalent value - it's not free money and in the end what truly matters are total returns.
@fredatlas4396
Жыл бұрын
@@SebastienAguilar Here in the UK a lot of companies pay higher dividends than many other countries, especially the large caps. But it looks like the growth, the actual price of those companies hasn't really gone anywhere over long periods of time, so the real return appears to be in the dividends. So reinvesting the dividends is very important to grow your money in those UK stocks, unless of course you just want to have the dividends payed out into a bank account for income. But the UK stock market hasn't provided very good total returns since 2009
Great video! You're doing a great job. I'm also interested to find information about living on investments during bear markets (in retirement phase). For example, selling about 4,5% per year during great times, and slightly lower, 2,5% during bear markets? Or just keep the course, and fix the amount? Do you know what I mean? 😉
@SebastienAguilar
Жыл бұрын
I see what you mean! Well, when you plan to live from your portfolio, you basically make sure it works even in the worst scenario (based on historical data). Right now we're far from the worst case scenario, this is actually a completely normal scenario. Remember that the stock market will go down on average 1 year out of 3. The 4% rule of thumb works for the worst case scenario for 30-year periods for a balance portfolio of US stock and bond index funds. It doesn't matter what happens during those 30 years, market up or down, you can withdraw 4% ( adjusted for inflation every year) every year and based on the research the portfolio will last.
@EroticFruits
Жыл бұрын
@@SebastienAguilar so you would make no difference yourself in withdrawal rate between good & bad times? Just follow the 4% rule and stop thinking about timing? 😉
@user-we2fe6wn4j
6 ай бұрын
@@SebastienAguilar Hi. What do u mean by "4% adjusted for inflation every year" ? For example, if inflation = 5% this year, what could we do ? Which % ?
@SebastienAguilar
6 ай бұрын
@@EroticFruits theoretically, yes. I practice most people will adjust.
@SebastienAguilar
6 ай бұрын
@@user-we2fe6wn4j If you started with 1 mil portfolio last year and withdrew 4% = 40k, then after a year of 5% inflation, you can withdraw 105% of 40k, so 42k. In the model, the amount you withdraw is adjusted for inflation, that way you can keep similar level of purchasing power.
How do I invest during bear markets? I'm changing course if I'm honest with myself. Maybe I needed this talk to focus more on my A game. Just buying on a regular basis my worst performing ETF to reach my optimal allocation of 50% IWDA 30% IWDA 10% EMIN 10% IUSN.
@SebastienAguilar
Жыл бұрын
Looks like you have a solid portfolio. And yes staying the course isn't always easy. But all you need to do is zoom out a bit and realize how the volatility we're experiencing today will mean nothing in 10, 20, 30 years... which is the time horizons we're investing with :-) All the best!