featured image for podcast episodeAlligators, Kittens, and Market Timing Around the Election

Alligators, Kittens, and Market Timing Around the Election
Episode 267

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Posted by Choose FI

Episode Guide

Episode Summary:

The episode delves into the concept of managing mental wellbeing through the metaphor of alligators and kittens, focusing on how to identify and remove negative influences (alligators) from life to make room for positive experiences (kittens). Discussions highlight the importance of controlling what can be controlled, particularly in times of uncertainty like elections or economic downturns. The hosts emphasize long-term investing strategies over short-term market timing speculation and encourage listeners to remain focused on building financial independence. Story-sharing from community members exemplifies the impact of financial literacy and the progress achieved through actionable steps. The conversation also touches upon valuable resources, like the Chase Sapphire Preferred card, and reiterates the significance of low-cost index funds for long-term financial success.

Episode Timestamps

ChooseFI Podcast Episode Show Notes

Episode Summary

In this episode, the hosts delve into managing mental well-being through the metaphor of alligators and kittens, focusing on identifying and removing negative influences (alligators) to create space for positive experiences (kittens). The discussion emphasizes the importance of controlling what can be controlled, particularly during uncertain times, while advocating for long-term investing strategies over short-term speculation. Community stories illustrate the positive impact of financial literacy and actionable steps in the journey toward financial independence.

Key Topics Discussed

  • Introduction to Alligators and Kittens

    • The metaphor illustrates how to prioritize mental well-being by focusing on eliminating negative influences.

  • Understanding the Metaphor

    • The alligators represent negativity, while the kittens symbolize positive experiences. The importance of removing negativity to focus on positivity is discussed.

  • Focusing on What We Can Control

    • Encourages listeners to limit exposure to negative news while emphasizing proactive measures in building financial independence.

  • The Dangers of Market Timing

    • The hosts discuss the irrationality of trying to predict the stock market, especially surrounding event-driven anxieties like elections.

  • Community Stories and Wins

    • Listeners share victories related to financial management and debt reduction, reinforcing the community’s support.

  • Take Action with Financial Tools

    • Highlighting resources like the Chase Sapphire Preferred card as a tool for maximizing rewards.

  • Conclusion and Community Encouragement

    • A call to action for listeners to share their successes and continue supporting one another in their financial journeys.

Key Insights and Takeaways

  • Focus on the Positives

    • Remove the alligators (negative influences) in life to make space for the kittens (positive experiences).

  • Control the Narrative

    • Stay informed but be selective about news consumption to avoid unnecessary negativity.

  • Long-term Strategies

    • Implement dollar cost averaging as a strategy for effective long-term investing.

  • Awareness of Financial Options

    • It's vital for teachers and all individuals to be informed about their financial options and investments.

  • Embrace Simplicity

    • Simplicity in investment strategies leads to better outcomes and reduced stress.

Actionable Steps for Listeners

  • Reevaluate and adjust news consumption habits to maintain mental well-being.
  • Create or review your investor policy statement to avoid reactionary financial decisions.
  • Take actionable steps to face financial fears and uncertainties.

Discussion Questions

  • What alligators do you need to eliminate from your life?
  • How can you create space for kittens in your financial planning?
  • What strategies have you implemented to avoid market timing?

Resources Mentioned

  • Chase Sapphire Preferred Card: A highly recommended credit card for maximizing rewards.
  • The Simple Path to Wealth by Jim Collins: Encouraged reading for financial education.

Podcast Information

  • Hosts: Jonathan Mendonsa and Brad Barrett
  • Podcast: ChooseFI
  • Website: ChooseFI

Don't forget to subscribe and share your financial wins with the ChooseFI community!

Embrace Mental Wellbeing for Financial Success

Managing mental wellbeing is crucial, especially in the face of financial pressures and uncertainties. Engaging with this aspect can significantly affect your financial independence journey. Here are powerful strategies to create a balanced mindset using the metaphor of alligators and kittens.

The Alligators and Kittens Metaphor

The alligators represent negative influences or stressors in your life, while kittens symbolize positive experiences and joy. Focus on removing the alligators first. Simply put, addressing the sources of stress allows you to embrace positivity and create a fulfilling life. Ask yourself, “What alligators do I need to eliminate from my life?” This reflection will help you focus on creating the space necessary for new, positive experiences.

Control What You Can Control

In periods of uncertainty—whether induced by politics, economy, or any other factor—it's essential to concentrate on what lies within your control. By minimizing exposure to distressing news or unnecessary stressors, you preserve your mental bandwidth. Consider these steps:

  • Limit News Consumption: Be selective about your news sources. Cut out negative news outlets and cultivate a habit of consuming information that uplifts and informs rather than overwhelms.
  • Focus on Long-Term Goals: During unpredictable times, reaffirm your long-term financial strategies. Avoid being reactive to headlines and stick to your established plans.

The Perils of Market Timing

One common mistake many investors make is attempting to time the market based on assumptions or predictions. However, it's crucial to understand that nobody can predict the market accurately in the short term. Instead of trying to second-guess market movements, focus on the following:

  • Adopt Dollar Cost Averaging: Commit to investing a fixed amount regularly, regardless of market conditions. This strategy ensures you don’t fall victim to market volatility, allowing you to accumulate shares at an average cost over time .
  • Stay Invested for the Long Run: Remember that time in the market is more powerful than attempting to time the market. Long-term investing yields far better results than fleeting speculative actions.

Emphasizing Financial Education

Financial literacy is an empowering tool that can propel you on your journey to financial independence. By enhancing your understanding of personal finance, you'll be equipped to make informed decisions. Here are a few steps to foster your financial education:

  • Explore Resources: Utilize books like "The Simple Path to Wealth" by Jim Collins to deepen your knowledge . Engaging with literature on investing and personal finance can expand your understanding of critical concepts.
  • Actively Participate in Discussions: Join communities, forums, or workshops where you can learn and share with others. Community support fosters confidence and encourages action.

Financial Tools to Achieve Goals

Harness the power of financial tools to streamline your efforts and maximize potential rewards. For instance, consider the Chase Sapphire Preferred card, which offers lucrative travel rewards for spending . Here are additional tools to enhance your financial strategy:

  • Watch for Low-Cost Index Funds: Choose low-cost investment options that can maximize returns over time. The expense ratio is crucial; a lower expense ratio means more of your money grows over time.
  • Review Your Investment Policies: Establish an investor policy statement that outlines your investment strategy. Refer back to it during times of uncertainty to maintain focus and reduce emotional reactions.

Educate and Teach

For those in education, it’s essential to be informed about financial options to better prepare for financial freedom. Financial education should not only empower you but also enable you to share insights with others.

  • Encourage Financial Literacy Among Peers: Discuss financial concepts and experiences with fellow educators to build a network of informed professionals.
  • Be a Role Model: Show others how to effectively manage their finances by practicing good financial behaviors yourself.

Achievements Through Community

Celebrating milestones—big or small—within a supportive community can significantly boost motivation and encourage continuous engagement. Share your financial wins with others, whether it’s paying off debt or achieving a savings goal. Together, the ChooseFI community focuses on collective growth where each story inspires another .

Conclusion

Focus on removing the alligators from your life to make room for kittens. By embracing financial education and utilizing effective investing strategies, you can forge a path to financial independence despite life's uncertainties. Share your progress with the community, engage in positive practices, and let the journey towards financial success begin today!

You've been listening to ChooseFI Podcast, where we help middle-class America build wealth one life hack at a time.

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What You'll Get Out Of Today's Show

  • Following US Election Day results, it's important to remember the alligators and kittens, a concept to approach overall mental wellbeing. The negative influences in life are alligators and all of the things that make life better are kittens. Focus on getting rid of the alligators.
  • It's a human bias to focus on the negative. How do you focus time and attention on the things that make life better? For Brad, he cut watching the news out of his life which has helped him to achieve a better mental framework for life.
  • The business model of the new is to keep you watching through the next commercial break. They cause anxiety. You can stay informed without being a part of that model.
  • Control what you can control and you will be in a better financial position four years from now regardless of the election outcome. There is so much outside of our control right now and worrying about it isn't productive.
  • Despite the number of people who are confident they know what will happen to the stock market as a result of the election, the fact is that we just don't know.
  • Market uncertainty is one of the reasons to have a plan for your money regardless of what is going on and automate it. Not only is it difficult to try and time the market, but you need to get it right twice, both when you buy and when you sell.
  • The FI community is about long-term thinking. It's not about quarterly earnings or even five-year trends, but performance over multiple decades and the decisions that will help get you to the wealthiest point over that time period.
  • With that long-term thinking in mind and in a time of calm, it's a great time to write down your investor policy statement. Having a plan for your investments, written down in an investor policy statement helps you to avoid being reactionary or make rash decisions.
  • In February, the Dow hit a high of 29,500. By March 20th, it had dropped 20-30% and many predicted it would go even lower. Defying the dire predictions, the Dow recovered 30-40% of its gains within a few months.
  • The problem with making market predictions is that there are far too many variables for you to account for and again, you have to get it right twice. Even the professions are wrong 50% of the time. What chance do you have of making your investment decisions around emotion enough to stay solvent or long-term or outperform the market over the long-term? Essentially no chance.
  • The highest likelihood of long-term financial success is to control the expenses on your investments. Low-cost index funds are going to be your best bet.
  • Following your investor policy statement and injecting new money when you can benefits you with dollar-cost averaging. Time in the market is much more powerful than timing the market.
  • ChooseFI listeners are creating space and making progress in their lives. Patty commuted to paying off debt within five years and just made her last payment, including more than $40,000 in credit card debt.
  • Joe replied to Brad's email, The FI Weekly, Joe shared that he and his wife transferred his 403(b) from a high-fee broker to Vanguard and also started on their journey to earning travel rewards.
  • Teachers are primarily the ones using 403(b)s, most of which are laden with really high fees and very few options. ChooseFI plans to have an episode in the coming months with Dan Otter discussing doing better with your 403(b).
  • Crystal sent in a message saying that she had no idea about fees and was investing with Edward Jones. Her investments hadn't done much over the last five years and now she's educating herself, but the fees appear to be hidden.
  • Since the market has done so well over that last five years, the reasons why Crystal hasn't made money are because she wasn't invested in a strategy that allowed her to keep up with the market or she was getting crushed by the fees.
  • Brad says finding the expenses for his old company's 401k options was relatively easy. Included in the table of investment options, one of the columns listed expenses. Other titles may be expense ratio or expense percentage. The numbers may range from 1.50 to 0.03.
  • Without a nicely organized table, you may need to look up the expense ratio by looking up the ticker symbol.
  • A low-cost index fund investment strategy is simple and not complex enough to require help from a professional. In contrast, a complex investment plan is probably costing you a lot of money.
  • With an actively-managed fund, a person, or team of people, are making decisions on what to buy and when to sell. Through the fees, you end up paying them for their time. And then the data shows that they aren't even keeping up with the market.
  • The difference between expense ratios of 0.1% and 1.0% is tens of thousands to millions of dollars over time after compounding.
  • Brad ran through a scenario originally published to RichmondSavers.com reviewing the impact fees have on an investment portfolio over a 40-year timeframe. The result was that a high expense ratio and advisor fees cut the potential net worth in half.
  • Even target-date funds may not get the returns you expect because they are too conservative for you.
  • It's good to think about what you are invested in and how much it is costing you.
  • ChooseFI's new website is now live! Check it out at ChooseFI.com or ChooseFI.com/start. There are still some issues to be fixed, but if you are having trouble finding anything let us know and send us your feedback to [email protected].
  • The feedback on The Simple Startup classes has been overwhelmingly positive. Kids aged 10-18 have been getting off the video games and acquiring new skillsets to future-proof their lives.
  • Rob Phelan has figured out how to offer the course year-round and the next session starting January 18th is open for enrollment. Registration will be open until January 8th or until it sells out. Previous sessions have always sold out.
  • Register at ChooseFI/startup for The Simple Startup between now and November 15th and save $10. Use promo code "podcast" and save another 15%.
  • Share what you are doing and how your life has changed by replying to Brad's email newsletter, The FI Weekly, and have the chance to win one of the books from ChooseFI Publishing. Sign up at ChooseFI.com/start.
  • Christian Choosefi'd his view of the pandemic. He's focused on the positive things, like spending more time with his family, time to exercise, eating healthier, and saving $4,500 this year.

Resources Mentioned In Today's Conversation

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