The Canadian Investor - Should You Buy, Hold or Sell during Market Sell-offs?

Episode Date: August 12, 2024

In this episode of The Canadian Investor Podcast, we dive into the mindset of buying during market sell-off and why it can be a smart move for long-term investors. Braden discusses a purchase he made during the holiday Monday sell-off. We discuss how market corrections can offer a good opportunity for investors to re-evaluate their plans based on their emotional reactions during volatile times. We also explore the differences between hard and soft sell rules, helping investors decide when to keep, trim or sell a position. Finally, we examine the DTC consumer brands that are struggling and the better way to play the space by investing in the ecosystems and platforms that power them.  Tickers of Stocks & ETF discussed: ASML, PTON, HIMS, WRBY, CHWY, BIRD, NKE, SHOP.TO, ETSY, META, MELI, AMZN, W, EBAY Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

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and the U.S. market just gets absolutely crushed. I check my phone. I'm like, eh, I'm supposed to be on vacation today, but it looks like a good day to buy some stocks. Yeah, I feel like unless you're someone interested in investing, you took the day fully off. If you're interested in investing, you definitely kept an eye on what was happening in the US.

That's for sure. And I wanted to start there today on my excitement when I see widespread market sell-offs. When I go onto my dashboard and I see every index down three, 5%, sometimes even more internationally, buying beaten down stocks when the rest of the market is in a bull run feels generally quite difficult. You're going against the grain. It's the feeling of quite difficult. You're going against the grain. It's the feeling of someone on the side of this trade is a chump. And I really hope it's not me. That's the feeling, right? But when the whole

market sells off, it's like, oh baby, that feels a lot better. Yeah. When there is a widespread market, clearly the war name is more impacted than others. I think if you were looking at like kind of miners, energy, those were like still down, but not down as much. I mean, gold was holding up pretty well, I think just as a safety almost asset. I think that's the main reason behind it when there's a widespread sell off. behind it when there's a widespread sell-off. Gold is one of the areas investors will go to, that and U.S. Treasuries, which is what we kind of saw yesterday. And I just recorded with Dan, which will be out in a couple weeks from now, because as you know, we're going to be taking, well, I'll be taking some vacation. So recording episodes in advance. So we had to mix in terms of, you know, I'm not making it too kind of time specific but one thing i'm breaking down for people and make sure you tune in at the end of the month is that i broke down the japanese carry trade which is one of the causes that a lot of uh you

know people were identifying investors were identifying for the market sell-off yesterday i think there's others but this one is one of the ones that kept being mentioned. Yeah. I think the Japanese index was down 12.5% at the open. Yeah, and then up 10% today, I think. And then up 10% today. I saw TSMC was down.

TSMC flash crashed a little bit. A couple names kind of did. So anyways, the whole point of this intro is that feeling goes away when I see there's widespread. anytime CNBC has a markets in turmoil segment, which by the way, has always produced a forward positive return over the next 365 days, 100% of the time. I always feel a little better in those situations

because I'm a long-term investor and I have a pretty good feeling, a pretty good amount of confidence that I'm not the chterm investor and I have a pretty good feeling, a pretty good amount of confidence that I'm not the chump in that trade. When it's going against the grain, you got to think a little bit harder. And so I bought some more ASML yesterday. It was kind of an opportunistic thing where it dropped under 800 bucks for like 20 minutes. And I was like, it just happened to be on my phone in the morning, drinking my coffee, and I hopped on my computer. Anytime it trades under a 30 PE, I'm like, I'm into it. And I was also this close to buying some Amazon

because it's getting whacked pretty good. But I just wanted to provide that quick update because my joinTCI.com subscriber update for our portfolios at the end of July was, hey, I did nothing. And so my update was, hey, I did nothing. And so my update was, hey, I did something. Yeah, I didn't do much. I bought some gold and I was kind of happy I was holding the gold yesterday. But yeah, I didn't do too much for me. I mean, I'm still didn't do any opportunistic buy yesterday. My view here is that we're going to see a lot of volatility leading into the US election in the next like two, three months.

So I think don't be surprised if we see these like two, three days down, two, three percent like down days, and then the next day, it's up to 3%. I feel like we're gonna be seeing a lot of ups and downs. So for people to get prepared, I don't know whether there's going to be as good buying opportunities or not. But I do have some names where I have on my list that I'm keeping a close eye on. I just wanted to take a little bit of a step back and just to see what will happen. There's just been a lot of news coming in, which wasn't super positive, especially for the U.S., with the jobs number being weaker than expected. And now, essentially, the market's pricing in at least one rate cut with the Fed in September and then potentially two as well. So I'm just taking a little bit of a step back, but I did not sell anything.

I'm just like, I just didn't pull the trigger on anything. Well, that's a great transition. I don't know if you meant to set that up like that, but what you're talking about your sell rules, you have two lists here, hard sell rules and soft sell rules. I think this is a good segment. Yeah, exactly. And I think honestly, so the two rules, I mean, these are just a big buckets of rules for people that I find people tend to adhere to. There's some positive and negatives to both. And I think it really depends on what kind of investor you're at that it may, may be better to have one over the other. So a hard sell rule is just when you have a rule in place that if something happens, you automatically sell your position. So for example, if a company you own has a negative earnings, you sell. If a company you

own has a year of declining sales, you sell. If a company you own cuts a dividend, you sell. So these are just example of like hard rules. So you know, if this happens, then I'm selling. The advantage of these kind of rules is that it removes the emotion and subjectivity out of it. I know lots of people that have these rules and it's worked actually quite well for them. I think it's especially good if you are someone that can get emotional with your investment or have a positive bias towards your own investment even when there is evidence to the contrary. The problem with these rules is that it tends to be based on numbers only and does not consider the context. Actually, another example

of that could be a rule where, let's say you have positions where for you, it cannot go over 10% of your portfolio. If it goes over that threshold, then you bring it down to 10%. Let's say, you know, maybe you give yourself 1% or 2% leeway. But, you know, one of the drawbacks here is like with that exact example is you don't let your winners run as much. In that example, you're actually just trimming. But if you take some of the examples I talked about, say declining sales on a given year or even negative earnings, if you applied that rule to the letter, I don't know about you, Brayden, but I can guarantee that there would be some really good companies that you would have sold in 2020 because of what happened and that Black Swan event that happened with the COVID-19 pandemic. So I think it's just, it's a little bit

of a trade off here. Hard sell rules can have their place. I know a lot of people have those and it works well for them. But for me, I'm more in the soft sell rule camp, which I'll go over. But any comments on the hard sell rules first? I think generally the last one talking about hard rules around performance is one I really try to avoid. The same way I don't think stop losses is a good tool for a long- can scoop up more shares in what I deem to be businesses that are going to compound my capital for a long time. If they have a broad market drawdown, like S&P was down 50% in the great financial crisis in 08. Like that was a pretty good time to buy stocks, not sell stocks, right? And then on the previous point, yeah, the whole problem with this is the world is nuanced. I think you can kind of put it down to almost every trick,

anytime you run into really hard sets of rules around investing is the world is nuanced and I think it just the money is made by you being able to think and and think about the pros and cons and and and look at the nuance that's where the alpha is yeah yeah and probably the one that resonates the most with me from a hard sell rule perspective and just because it's more of a portfolio management thing is what I you know know, one I talked about is, you know, you have a certain amount of allocation and you want to hedge your risk and not go above a certain allocation for a given stog, Bitcoin, whatever it is. And you want to trim it back down. That I can definitely understand because you're also mitigating risk. Yes, you can, you know can limit your returns. But again, I think it's a trade-off, right? It's something that you know when it gets above a certain

percentage, it stresses you out, then put that rule in place and you automatically do it when it goes above that percentage threshold. That's simple. It's one of the advantages that self-directed investors have is they don't have those arbitrary kind of risk rules, risk portfolio allocation, volatility management type of rules. Like if some monster company turns into a monster winner and all of a sudden becomes more than 10% of your portfolio, letting it run, aka doing nothing, which is a decision in itself, might be the best decision you ever make in your entire investing career. And so I don't want to miss out on those. No, no, that's a fair point. And I mean, again, I think that's why these rules are very personal to just know yourself. And that's the last segment I'll talk about is when you have market drawdowns or days that are deep in the red or weeks, whatever it is,

I think it's important to just realize how you react as an investor and just be honest with yourself. Because you know me, I can handle volatility. That's why I have such a big allocation in bitcoin but it's not for everyone not everyone can handle that volatility and it same applies to stock now soft sell rules they give you a bit more flexibility actually a lot more flexibility here where you have a rule in place but you also consider the context around it before deciding to sell or not so So take my example of, you know, 2020, you have a company that, you know, is really impacted by all the lockdowns, or could have been

the supply chain issues has a year of negative earnings or declining sales, and then rebounds the next year to have an amazing 21 and onwards, right? So you have to take that into account. This approach works best, I think, for those who can be unemotional with their investment and can look at their holdings objectively. The problem with soft sell rules, though, is that you can end up keeping companies that are trending downwards that you would have sold if you had hard sell rules and you end up convincing yourself that bad results are only temporary when in fact, it's actually a structural problem with the actual business. And it's unlikely to get better in the

long term. And personally, I think people's if you've been listening to the podcast for a little bit, you know where I stand. And I think Braden, you're like that as well is when I decide to sell, it's usually because there's more than one thing that's not going right direction with the business. I also don't just use one metric, I'll use a bunch of different metrics, factor in earnings calls, the management discussion and analysis, supplemental financial information if it applies for the company, even macroeconomic trends and how that could impact positively or negatively the company. So that's how I will factor in my decision to kind of buy while I in this situation would be sell a company. So that's the approach that works well for me. But again, I've seen people with hard sell rules

that I've done actually very well, just because for them, they know that that's the best approach and that they are risking bigger mistakes by using soft sell rules like I think both of us do. Yeah. And I think a combination is the sweet spot, right? It's like, okay, I have these sets of things. If X happens, that's just unacceptable for it to be in my portfolio. If Y happens, I might think about it. And that might fit into that second bucket. I think that's the perfect fit. And I have a combination of hard and soft together.

I think that that's the really valuable approach because you have a kind of a systematic approach to, look, I draw the line here. That's okay. And then on these types of things, I'm going to need to have a more nuanced approach. I think that's a good way to go. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real

people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept

of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you

there. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Let's talk about consumer companies.

And when I say consumer companies, I just mean that their main business is serving the consumer segment, not B2B. And specifically, I want to talk about direct to consumer brands. So think of a lot of these companies are exclusively e-commerce, online shopping, but a lot of them will also have some in-store experience as well. But they're thought of as direct to consumer brands. So these are the types of companies I'm going to talk about today. They're thought of as direct-to-consumer brands. So these are the types of companies I'm going to talk about today. And my segment is a two-for-one, a two-for-the-price-of-one here,

because I'm going to talk about two types of these companies. One business model that I'm very bearish on, and one that I'm very optimistic on. So let's start with the bad news. Always deliver the bad news first. Direct to consumer brands, the growth can be fantastic. The rise from zero to well-known brand can be meteoric. You can go from never hearing about Peloton ever in your life to all of a sudden, everyone's buying one during the pandemic and then getting it and doing their posting pictures on Instagram of their home workouts, doing conference calls while on their Peloton. These brands can go from zero to a 100 in culture very, very quickly. Yeah.

Yeah. Stop the story there for Peloton. Don't say what happens after that. Don't continue. And that's where I'm going with this is that these consumer brands, most of them look like Peloton. And sometimes the gross margins can be just absolutely exceptional too, at least for a while. A lot of these big brand names demand a premium price. The growth is fantastic. You can go from

never hearing about it to your favorite comedy podcast host is telling you they love this new direct-to-consumer brand which helps you you last longer in bed, or some new beautiful mattress, or some new workout routine, or some amazing new supplement that you got to try. And they usually demand that premium price out of the gate. And you see gross margins for some of these hard goods at 80 plus percent. And you're thinking, wow, this is a freaking awesome business. I see this all the time. However, here's the bot.

There's a catch. There's a catch. The SG&A costs will be like twice gross profit on some of these companies in some of the most extreme names. So you'll have amazing top line growth trickles through to amazing gross profits. The gross margins are amazing. And then you see the operating margin negative and losing millions and millions of dollars every quarter in the tens to hundreds of millions of dollars a quarter. every quarter, in the tens to hundreds of millions of dollars a quarter. And no real signs of turning a corner on being profitable. Now, I'm going to get into the accounting on this really quickly. But the problem stems, in my mind from competition coming up really fast with these types of direct

consumer concepts, they get copied quick. And then you need to spend, spend, spend, spend, spend on marketing to build a brand that leads and resonates the category to be top of consumer mindshare and be the de facto company that folks think of. And the problem here is that it is a SGNA, aka selling general and administrative cost expenses treadmill. The marketing costs sometimes scale faster than the revenues. And that's exactly the math I'm going to pull up here. So if you look at an income statement, like a standardized one you'll see on FinChat or something, you'll see SG&A right under gross profit,

which means selling expenses and general expenses. That includes sales expensive, paying for the salespeople, travel expenses, you know, rent, utilities, office supplies, equipment, that'll go into like general expenses. But the heavy hitters for these companies are marketing and advertising. Those are two massive hitters in this that are tucked into SG&A on a standardized income statement. So this is not a comment on any of these companies, Simone, but rather pointing out that it's difficult for this model to make work. And I'm going to go through some of these names. Him and Hers Health, which is probably the strongest performer of the five I'm going to talk about today. They sell direct-to-consumer sexual health and wellness type things. They advertise all over the place. And they've had a really good rise to where they are and the top line growth has grown at 97% a year since 2018, which is spectacular.

And SG&A costs have grown 52%. For the concept of here, I'm just going to call them growth costs. Growth costs have gone up 52% a year. Okay. So that's not bad. It's scaling twice as fast. All right. It gets worse. Chewy, Chewy, the brand that sells pet equipment, uh, pet stuff, Ryan Cohen, total revenues. So sales have grown at a companion growth rate of a nice clip of 41%. Growth costs have grown exactly also 41%. Again, I'm just calling SG&A here growth costs because this is growth costs to grow these businesses. Peloton, revenues have grown during that time 45% year over year and growth costs have grown 40%.

Warby Parker, the eyeglasses brand, top line sales grew at 16% and marketing growth costs grew faster at 17%. Allbirds, the shoe company, total revenues grew 5% and SG&A costs almost compounded at 18% during that time. These have not been good stocks to own, Mr. Pedage. Allbirds is down 98% all time. Chewy's down 55%. Peloton's down 84%. Him's the only positive performer is actually up 58%.

That was the first one I went to the strongest performer and revenue is going much faster than marketing costs. That's what you want to see. Warby Parker's down 75%. Oof, not a good basket to own, Simone. And you can go through the list. Many of them have gone extinct. Many of them have gotten taken out. Many of them look like stock charts that you do not want to own. Many of them look like stock charts where you lost a lot of money. And this is mostly why. Any comments? No, I mean, I think it's for me, it just resonated in terms of the importance of looking at the operating margin, because you capture a lot of this while you capture all of this cost, you don't break it down as GNA, but it's all your calls that are included in that or EBIT.

So if you want to look at those two, it gives you a much better idea. As much as gross margins are great, it's just, you know, it's only a small portion of your expenses. And sure, you know, in textbooks, you can sometimes see like, oh, well, your operating costs will be, you can sometimes see like, oh, well, your operating costs will be, sorry, your SG&A might be more stable, you know, your rent won't increase as fast, as long as you have higher gross margins, that's what's important. But for me, I tend to look at the operating margins just because it captures all of that. And when I start seeing a whole lot of movement there, especially downwards, then I'll just have a look and understand a bit more what's happening with the business. Now, on the contrary, for the good news, this is a classic example of selling picks and shovels in the gold race.

There's an opportunity in the marketplace and those who are selling the kind of tools and underlying infrastructure typically are the ones that win the most. And I feel the same way when it comes to direct-to-consumer brands because these direct-to- consumer brands lack a lot of competitive advantages And that's why you're seeing them need to spend, spend, spend, spend, spend. They're on a SG&A treadmill. And it's not the type of company that I want to own. It's much better to play the ecosystem players here. And some of them are fantastic. The tools that power them and the marketplaces where they find distribution and advertising spend. The reason is they have many of the competitive advantages that you want. If I look at like the

seven powers in that book, they have four of them for sure. Scaled economies, yes, there is operating leverage and costs don't need to necessarily scale. Network economies, yes, definitely you want to go where shoppers are if you're going to be a customer of one of these places. Switching costs, yes, switching platforms can be a massive pain. And four, it is a corner resource because there can only be, there may only be one, maybe two places that people go in terms of platforms for finding niche crafts online. But there could be thousands, tens of thousands of merchants, right? So there's this huge corner resource in terms of supply and demand on these marketplaces. If we look at Shopify, Etsy, even Meta for where

all the a lot of the ads spend gets captured. Google, again, from that same thing, MercadoLibre, Amazon, Wayfair, eBay. These have been, of course, to varying degrees of success, a much better basket to own. And this is not a comment on any of these stocks or any of those direct-to-consumer stocks, but more so around a framework around investing in certain growth categories. These are not all created equal. One part of the ecosystem thrives and has amazing unit economics, and one has to spend on a treadmill of growth in perpetuity. It never seems to really take a turn.

The promises that they gave their VCs doesn't really ever come true in the public markets from my personal assessment over the past, you know, eight or so years that these have been so popular in public markets. So that's, uh, that's my thoughts on direct to consumer companies. I think it's, uh, it's a good overview. I mean, there are some hybrid ones, right, that are kind of had tried to shift a bit more to direct to consumer. I'm thinking like Lululemon and even Canada Goose, which have had decent success there. I mean, they're both struggling for, I think, more reasons associated with the kind of market they're trying to capture, luxury and let's say kind of middle luxury. But those were established brands. I think they've shifted a bit more

to the direct-to-consumer. Correct. That's it. You know, Nike going, investing heavily into their D2C experience is a lot different than, I have some upstart in 2018, some shoe company, and I'm going to sponsor every

TikToker under the sun over the next six years. That's a lot different, right? Like one's in a very established brand leveraging new distribution channels. One is spending, spending, spending to find distribution among new channels. spending, spending, spending to find distribution among new channels. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you

have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building and people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage

account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store, and I'll see you there. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in

South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's Airbnb. your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Yeah, no, exactly. But no, I think that was a great segment. And we'll finish it off here with having a plan when investing. So it kind of goes with what we were talking about at the beginning with the market sell off, market volatility, and then obviously some of the sell rules, I guess, you know, ties in a little bit into that. But I thought it was good to talk about that because if you own, you know, big tech or an index fund, you know, that's heavily in big tech,

you've definitely felt some pain in the last couple of weeks, not just yesterday, we're recording this on the six. So even if you take out big tech equities, I've seen a pullback in the last few weeks. And if you're listening to this podcast, chances are that you have a decent allocation to equities and probably decent allocation to big tech as well. And the NASDAQ, like I mentioned, it hit a correction territory and big tech names have all gone down. I would say, I think all of them have gone down at least 10%, right? Since the peak, which, you know, if you zoom out, obviously, you know, they've had a fantastic year. So keep that in mind, but I'm just talking here since the peak. And I think it's important because first of all,

you know, I don't think we're actually I don't think we're having any bake sale for the shareholders of these these companies as of now. No, I think they're doing OK. And I mean, I think it's just a reminder that 10 percent corrections on the S&P 500 happen on average. I think it's about every year and a half or so. So, I mean, it's quite normal. So, of course, you know, could it get worse? Sure, it could. Could it just be the end of it? Of course, that could be the end of it as well.

But I think it's just an important reminder of just being self-aware how you're reacting when you get these big market swings, obviously, downwards. Because, you know, it's fine to have a fantastic plan in place. But if your emotions get the better of you and you panic, that goes out the windows. And I think it was what Mike Tyson that says, everyone has a plan until they get punched in the face. And from an investor perspective, I mean, being punched in the face is, you know, seeing your investments go down three, four, five, 6% in just the span of a few days or even a day. That's a reality check because, you know, you just have to be honest with yourself.

So if you find yourself panicking or selling position because you're afraid of losing money, then you're probably you probably need to reevaluate your strategy. And I think it's important because especially if you've started investing in the last year, year and a half or so, this might be the first time where you see this kind of market reaction. And, you know, it's fine to tell yourself, oh, I'll be steadfast when it happens. But until you live it, you don't really know how you're going to react. Yeah. I think that Mike Tyson quote says it perfectly, especially if you've, if your expectations, like what does they say? Happiness is just expectations minus results. And as investors, you have, you can build up unrealistic expectations if you're born in a bull market,

right? There's a direct correlation between an entire generation of people who are born in different decades view on the stock market, depending on as they were growing up and starting to make money, how it performed, right? There's an entire psychology that develops around that time. And so if expectations, if happiness is just expectations minus reality, people need to be fully educated that the expectations should be volatility. The only thing you should expect is volatility so that when it comes, you know that you've already expected that it's going to happen. Yeah, and you only need to listen. And there's quite a few portfolio managers that started managing money in the kind of early 2000s.

So right after the tech correction of the 1990s or 2001, I think it was, and before the great financial crisis. And if you listen to them, I mean, almost all of them, you'll hear what they learned. And oftentimes was they had a bit of overconfidence going into the great financial crisis. And they learned a whole lot in terms of you know how to react what to do lessons learned from when you get a massive market correction that can span over what was a couple years to three years until the market's fully rebounded so i think that's always good to you know just learn from those portfolio managers especially those that may manage like high net worth individuals that you know actively manage the portfol, but don't necessarily have funds or anything like that.

Just, I know this is hard, maybe hard for people to rationalize, but if you are a self-directed investor and I, you know, it's, it's weird to say it's just your money, you know, well, of course it sucks to lose your own money, but if you have conviction for what you're doing over a long term, just be actually quite grateful that it's not you're managing high net with individuals and then have to report back to them on someone who might be completely uneducated and just see the stock markets going down and that you're at fault and it's all your fault. Just know that those are potentially the people you're trading against with those high emotions and conflicting incentives. This is good for you. This is why we're doing it. This is why you have an advantage.

Yeah. And honestly, I think there's some very good financial, you know, advisors, planners out there. There's some really bad ones too. And obviously we've been critical at times. But if you're someone that's really emotional and, you know, having a financial planner, a good one, will actually rein you in, keep you on track. Even despite their fees, that could actually be a whole lot of value for you. Actually could create some better outcomes if you're one of those people. even despite their fees, that could actually be a whole lot of value for you actually could create some better outcomes if you're one of those people. So I think it just goes back to knowing yourself when these things happen. And being 100% invested in equities, like let's be

honest, it's not for everyone. It's going to be pretty volatile. If you have a long time horizon, like Brayden mentioned earlier, corrections of 10, 20, 30% plus don't phase you, then you'll likely be fine and you just stay the course. But if you have a shorter time horizon, maybe you're retiring in a few years, or you just can't stomach the volatility without panicking and panicking selling, then it might be worth looking at diversifying your portfolio with other assets, or maybe even, you know, having someone where you can bounce ideas off. It could be, like I said, a financial planner, financial advisor, that's a good one. And it's important to remember that investing is also

not an all or nothing proposition. So, you know, there's equities, but there's also, you know, I have a bit of cash on the sidelines through treasury bills getting me 5%, whether it's precious metals, Bitcoin bonds, etc. There's other types of assets. And I'm not saying you should do this or not. But what I want to say is just basically take a step back when this happens and just see how you react to it. And just see how you react to it. Because that will probably, you know, if you're being honest with yourself. And you take the right step to either correct that.

Or, you know, if you're just unemotional. You stay the course, no problem. Then there you go. You know how you'll react in future corrections. But if you can't stick with your plan that you had drawn up. Then it's probably time to look at making some revisions to that plan. And honestly, there's nothing wrong with that. I think it's just being self-aware and just being knowing yourself. And if you need to make some slight changes to your plan, because if not, you probably will. If not, you calculate that you'll make a huge mistake at some point in

the future, then there's nothing wrong with that. Yeah. Yeah. And the switching the plan or rethinking the plan doesn't have to even be so extreme. I know some of us sometimes some fantastic decisions for some people has been, all right, individual stock picking is not for me, but being fully invested in equities is. And so I've gone with a low cost diversified index fund and happy as a clam. I know multiple people like that. Like my brother, for instance, he's like that. And I'm like, dude, don't change a thing. Keep going.

Keep going. Like what you're doing is perfect. And so, yeah, the plan doesn't have to be investing is not for me. No, exactly. Yeah. And in fact, it should be. It is for me. Hopefully, if you're listening to this podcast, you already know that. But yeah. Yeah, because I mean, if you're in cash only, I mean, you know, it may not stress you out. It may keep its value on a nominal basis, but on a real basis, adjusted for inflation, you're actually losing money over time.

So even though right now you can get, you know, especially with U.S. dollars, you can get over 5%. And actually, did you know that I did some little calculation with the weakening Canadian dollar? If you've held US treasury bills, so very short term US treasury bill, one to three months like I do, you've made so far this year, about seven, seven and a half percent on your money. Just holding that with the fact, yeah, and obviously in Canadian dollars. Yeah, I calculated in Canadian dollars. So,

you know, food for thought for people. Obviously, it's not an all or nothing. I think that's really important for people is, you know, you don't have to do an all or nothing, but just looking at the different options. And like you said, whether it's just being fully invested in equities, but just using index fund, like there's so many different things you can do. fun. Like there's so many different things you can do and just find the approach that fits best for you and that you can follow and stick with your plan. If you know, we see a pretty big market correction. Yeah. Well played. And I think that there's like, I'll, I'll use an example of what I've been thinking through just, just this past week,. So in my mind, I'm like, okay, I want to own all three big cloud providers, the big three, the GCP, the Microsoft, Azure, the Amazon Web Services. I'm like, I want to own all three

and I don't want more positions. So should I just buy Amazon and then I complete the trifecta? And then I'm like looking at the cues and I'm like, I could just replace this with the cues and just be fine. And so these are the types of things that I think are totally fine to regularly question yourself on. I think everyone does. And to, kind of second guess and maybe that kind of lack of confidence or whatever it might be moving forward. I think everyone deals with it. But at the same time, if you stay invested, like rounding about this all through all the volatility, if you stay invested for a long time, we're going to look back at all this and say that

was just a blip or, you know, one year, two years, three years of performance didn't really matter. But the 20 to 30 to 40 years really did. Yeah, that's it. That's essentially, you know, when you zoom out that it makes a whole lot more sense. But in the moment, it's easier said than done sometimes. I think that was the reason I did that is because, you know, yes, it's easy to look back at 2008, 2009, 2010 and be like, oh, like, look, if you you stayed invested look how well you're doing now but i can guarantee you in the moment and i was old enough like obviously you too but i was probably a bit more in the start in my investing years just based on my age like you know it was scary for a lot of people you know the u.s was going you know the whole debacle with the subprime mortgages,

and then the great, great financial crisis. So I think it's just, it's just a good reminder that yes, when you zoom out, it's much easier to say like, Oh, like, look at this, you know, person that's held Amazon for like 2025 years. But in the moment, a lot of people couldn't have stomached the volatility when you had those massive drawdowns. So just keep that in mind. Yeah, that's, that's so true. It is, it is easier said than done. I don't know if I'm trying to pull it up. I'm Googling rapidly right now, but it's, it's a really hard thing to query on. If I find it, I'll do a segment on the podcast, but to summarize it it is basically the top performing like schwab personal accounts like ever so you know accounts that have been around for the last like 30 years or whatever the best personal diy accounts a lot of them were people who forgot the password yeah i heard about

that yeah yeah that's funny because they did nothing yeah they did nothing and you know the details are kind of irrelevant here like that that in itself is a funny concept right like the people who forgot their password had the best results. And sure, there's some luck involved there. Like, oh, I picked Amazon when it was down 80% in 2002 and I had 100% of my portfolio in there and I forgot the password. Yeah, I'm gonna have probably the best performing account.

But there's a lot of insight in that anecdote, right? Like people who forgot their accounts had the best performance. Thanks for listening to the podcast folks. We really appreciate you. And, uh, we are here Mondays and Thursdays all through the summer.

Hope you guys are having a great summer. I know, I know August has shaped up already to be, to be really nice and hope everyone enjoyed the long weekend as well. Simone, any, any, uh, any big plans for the rest of summer? No, just renting a cottage for a couple of weeks. So that's why we'll be recording some,

trying to record some episodes in advance. I'm hoping I won't have to record during those two weeks. May have to do an episode, but that's a big plan for us, bringing the the family there and a few friends over time so i get our little lady to go in the lake she loves the water with nice floaties on yeah i don't know if you can see but i'm in i'm at my cottage right now and there is i kind of figured it looks behind me and a baby life jacket in the back so my nieces

have all the all the goods here and they love swimming in the on. So my nieces have all the goods here, and they love swimming on the lake too. It's very cute. Yeah, I got to get them tired so they sleep well. Yeah. That's the trick. Everyone sleeps a little better up here. Yeah, so the parents get relaxed for like an hour,

an hour and a half at night. That's the trick. It's like when, you know, for those who don't have kids, like you're part of the day where you can relax is basically like the hour or so between the kid going to bed and you going to bed. Yeah. Yeah. Dude up here with my family. Cause you know, I get the, I don't have kids yet personally, but the, uh, you know, the uncle I'm cool. The cool i'm the funcle uh the two the two part the two times a day where things get wild up here are midday nap dock party because we

got like you know we got a we got a window there dock party get down there oh yeah the kids are asleep and then yeah like cards right after bedtime after bedtime. These are the two opportunities to have a good time. I can definitely relate to that. Thanks for listening, folks. If you have not checked out FinChat for free or with a paid subscription, FinChat.io, you can take 15% off your plan with code TCI.

That is code TCI for FinChat.io. We'll see you in a few days, folks. Take care. Bye-bye. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making