Ep 208: Market Volatility 101: Essential Questions for Smart Investors

Well, here we are everybody.

We are talking about stock market volatility again.

Last week we talked about some different things that you can do to help yourself sleep at night with the stock market volatility.

And we also gave you some concrete tips of action items.

You can go back to last week's episode and listen for those.

This week we're gonna talk about some different questions that you can be asking yourself about the stock market volatility.

Hope that you enjoy this episode.

And here we go.

Welcome to the weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and how to build true wealth.

So come on and let's enjoy this journey together.

Welcome to episode number 208.

If you listen to number 207 that I released last week, we talked about some things that you can be doing with the stock market volatility that we've been experiencing in 2025.

We're going to talk about some questions that I want you to ask yourself today.

And this is really in response to the question that I have been getting from lots of people, both clients and not clients lately.

I'm trying to put out a lot of content that can help you to live a better life by how you handle money.

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Being a financial advisor and being the fact that it is 2025 and there's been some ups and downs of the stock markets this year, I get some version of this question several times per day and the question is, what do you think about these markets?

What's gonna happen with the markets?

What do you think's going on in the markets?

I had a friend ask me that question this morning.

I said, I don't know, but maybe the right question should be how does this volatility fit into my personal financial situation?

How does this create opportunities for me?

And yeah, what threats does it put towards my financial situation?

None of us can predict the future.

We have to come up with a plan and then stick by our plan.

Now we can adapt our plan, but we have to come up with our plan and some philosophies instead of stressing out and watching CNBC and the financial websites.

Let me give you some questions that you can ask yourself and maybe these questions will lead you and Your financial advisor, if you have one, to take some positive steps or just release some stress.

My first question is what potential opportunities might be available in this market environment.

Are there sectors, industries or asset classes that could benefit from the current economic conditions?

Should I consider reallocating capital towards undervalued investments that have long term growth potential?

Or are there any new investment strategies such as alternative assets, hedging strategies, things like that can help to improve my portfolio resilience.

Oftentimes there are opportunities when there are downturns in the market.

So there's a smart guy named Warren Buffett, you may have heard of him, and he has a couple quotes that I think are pretty impactful that help us to see opportunities.

One of them is be fearful when others are greedy, and greedy when others are fearful.

This well known advice suggests that when markets are booming, that could be a time to be cautious because we might be buying at highs.

Conversely, when fear drives the market down down and investors are panic selling, that's often a good time to look for bargains.

Warren also says the stock market is a device for transferring money from the impatient to the patient.

So what does he mean there?

Most investors react emotionally to short term volatility leading them to buy high and sell low.

Buffett encourages patience and long term thinking.

Now is that hard?

Yes, it's hard.

But waiting for the right opportunities rather than chasing trends can pay dividends in the long term.

So let's make sure that we're not acting fearfully and let's make sure that we are looking for the opportunities that might exist during a market downturn.

One of those opportunities might be for tax loss harvesting.

Are there investments in my taxable accounts that I can sell at a loss to offset gains?

You wanna make sure that you're working with either your financial advisor or your accountant, or that you really know what you're doing.

When looking at tax loss harvesting, make sure that you understand the IRS wash sale rule, which does prevent repurchasing the same or substantially identical security within 30 days.

When you have some securities where you've taken a loss, you can sell them to offset gains in other parts of your portfolio.

Another question to ask is are my investments diversified enough?

We all love seeing the upticks.

When one stock keeps going up and up and up and up and up, but the up doesn't go forever, and then we have portfolio downturns.

So we want to make sure that we don't have our proverbial eggs all in one basket and that our investments are diversified enough.

Do you have too much exposure to a single stock.

Maybe you started buying that hot stock and now your portfolio consists of an inappropriately high amount of that stock.

Do you own too much of any one sector?

Do you own too much of any one asset class?

Should you consider rebalancing your portfolio as some of your investments have done well over time?

Maybe they now occupy too high a percentage of your pie chart and you might want to consider rebalancing, which will force you to buy low and sell high.

So that question is, are my investments diversified enough?

If you've listened to any of my episodes, you've probably heard me talk about investment time horizon.

So let's talk about what is my investment time horizon for this money?

Am I investing for the long term or for the short term?

You might have a fund where you're putting money away so you can buy a vacation home at the beach.

Maybe with a five year timeframe.

That money maybe should not be overly exposed to market type investments.

If you happen to be ready to buy that house, and that's when we have a market downturn, it can derail your plan to buy that beach house.

Now let's look on the other side.

Let's say that you are 30 years old and you have an IRA and this is your retirement plan.

Well, if these monies fluctuate, you can't even touch these funds for decades.

So you probably have the time horizon to ride out that volatility.

Now, if you're getting close to retirement or you're in the distribution phase of your life, maybe that's a time to have more conservative investments or some gas guaranteed products that can give you a guaranteed stream of income.

So these are questions to ask yourself, like what is my investment time horizon?

And given the time horizon, do I have time to ride out some potential volatility?

Let's also ask ourselves, has my financial situation or my goals changed?

Do I still have the same financial needs that I did, or do I need to adjust my investment strategy?

Maybe a few years ago your income was lower and your expenses were higher, but now you've gotten some debt paid off off, you have a higher income.

This might give you permission to have less aggressive investments because you don't need to save as much money going forward.

So this is where working with a financial advisor and having a conversation once a year, twice a year, three times a year about your financial situation, your goals, becomes very important.

When there are what we call liquidity events, which means that you come into a large sum of money, maybe through a business sale, maybe you might have an inheritance and things like that.

Those lump sums of money can actually change your financial situation and can cause you to need to revisit your investment strategies.

So speaking of strategies, are you following an actual disciplined investment strategy or are you just picking stocks off of what the latest TikTok influencer said?

Or maybe even saying, Hey, I own XYZ product.

I like XYZ product.

So that must mean that the company that makes XYZ product is a good stock to hold.

That is certainly not always the case.

Companies that make good products still may not be financially sound.

They may not have good fundamentals.

Make sure that you have a well thought out asset allocation strategy that aligns with your risk tolerance and make sure that you're not making impulsive decisions and you're sticking to your long term plan.

Now, what might be causing the market volatility?

Is it due to economic fundamentals?

Is it due to political events?

Is it investor sentiment?

We probably remember and we're right at five years later Covid.

So we had the COVID pandemic that caused a very steep V shaped curve in the stock market.

The stock market dropped quickly and then it went right back up relatively quickly.

So let's ask ourselves what's causing the market volatility?

Is there something truly going on with the economy or is it just a short term correction or maybe just a cyclical type of event?

Here are some questions that you might not like, but these have to do with personal financial behavior and involve something called personal accountability.

A lot, not all, but a lot of my personal financial success or my personal financial failures has to do with the things that I do or the things that I don't do.

And yes, I don't do all these things.

I don't get them right all the time.

But these realities apply to me, you, the rich, the poor, and everybody in between.

So especially when we're going through periods of stock market volatility, let's ask am I spending within my means or overspending?

Maybe due to stress or bad spending habits that don't align with your income and financial reality?

Am I continuing to save and invest consistently?

We have to look at investment time horizon.

But if you have a long time before you need that money, making consistent investments to your retirement accounts, your 401ks, your IRAs, even during volatility, can ultimately lead to lower average share prices.

This is something called dollar cost averaging into the market.

Now, depending on your time horizon, have I adjusted my financial habits to align with my long term Goals.

Are you prioritizing needs over wants or are you prioritizing wants over needs?

Make sure that your financial habits align with your long term goals.

Finally, and this is a tough one, especially in today's world, of all the different news channels and social media posts, am I making financial decision based on headlines or am I making financial decisions based on fundamental.

So there's a lot of media hype, a lot of social media hype.

And have I taken the time to analyze what the facts are, not what the infotainment channels say?

I have gotten quite a few calls over the last week from clients and friends asking what's happening with the market.

I saw this on tv.

I saw that on tv.

A lot of the news is based on the philosophy of that channel.

So make sure you're making your financial decision based on facts, not headlines.

Oftentimes the headlines are designed to get clicks, not necessarily to be accurate.

And while we're on the subject of personal financial behavior, why don't we ask ourselves, the people that we know, the people that are financially successful, probably means they have some margin.

It means that they're generous.

It means that they're not overly stressed out about money constantly.

It means that they have a positive view of money.

What are they doing?

And can I do the same thing?

Okay, so many of these people are probably living within their means.

They probably are providing a lot of value to the world and to the economy.

That's why they have higher incomes.

And ask yourself if you can do the same things now on the other side.

Ask yourself, you know your broke friends, I know you have them because we all have them.

The people that just, even if they make a decent amount of money, they just never seem to have anything left over.

Over.

Or maybe they don't earn a good living because they don't provide that much value to the world.

Ask yourself what they're doing and then drumroll, please do the opposite.

So we can find lots of models in the world of what we should do with our money and what we shouldn't do with our money.

Now, money doesn't buy happiness, but it can prevent a lot of stress and take away some problems.

I mean, I'm fully aware that many problems, like actual concrete problems, can be made smaller with the addition of money.

So let's wrap up the episode and talk about some philosophical questions you can ask yourself about money.

Maybe you can get some conversations going with friends and family.

Maybe you can do some soul searching and start thinking about your money philosophies.

So how does money affect your overall happiness and stress level?

Is money a tool for happiness or does it control your emotions?

Do your financial decisions align with your core values?

This is big because we experience stress and frustration when our behaviors don't align with our core values.

So if your core value might be to get some of that debt paid off, but your behavior is using that credit card just over and over, then your decisions and behaviors are not aligning with your core values and you're probably going to have some stress and frustration.

How do I or how do you define financial success for myself?

Now at the end of every episode of the weekly wealth podcast, when I have an interview, I always ask the guest, what does wealth mean to them?

And I don't think anybody has given a dollar amount yet.

Everybody typically gives some version of freedom.

So how do you define financial success for yourself?

And that can be different than my definition of financial success for me.

But how do you define financial success for your that's a great question and a great conversation starter.

What about your upbringing?

What money lessons did you learn from your parents?

And are those positive or negative?

Do they empower you to live a full life or do they disempower you and give you some scarcity mindset or victim mentalities?

So this one's deep, but sometimes when we get past that one, we can actually improve the quality of our lives when we realize that maybe some of our money lessons, some of our attitudes were not positive.

Leave the negative ones behind and take the positive ones with you.

How would you feel if your net worth was displayed publicly?

Would you be proud?

Would you be embarrassed?

Would you be indifferent?

This leads to the question of like, does your self worth come from your financial status?

That's a fascinating question.

And then finally, what financial advice do you disagree with?

Even though it is widely accepted, there are some mainstream money principles that may not work for you or you may not.

Like, what are some of those?

So these are just some talking points.

And, and I love being deep and I love thinking about philosophies and I love Money is such an important part of our lives that I think it's important to look at different ways to think about it.

So I hope you enjoyed this episode.

Nobody knows what the future holds for the stock markets, but most things are temporary.

We may be at the bottom of a dip, we may continue to go down, we may have a V shaped curve, I don't know.

But I think if we put in some sound financial principles, define our philosophies, and follow a disciplined investment and personal finance strategy, it might make sense for us.

So if you're close to retirement, you may want to consider increasing your cash.

If you're in retirement, you may want to make sure that you have six months or a year's worth of cash in some sort of a vehicle like a money market sitting in the bank or an investment account.

And just make sure that we are not being overly emotional.

It is a privilege to bring this podcast to you.

I love what I do and I believe that how we handle our money should positively impact our lives and the lives of those around us.

I hope that you will share this episode with your friends, family, colleagues and co workers.

And until next episode, I wish everyone a blessed week.

Thanks and don't forget to check out our Facebook group and check us out on instagram and email davidarallelfinancial.com if you have any questions.

Have a great week.

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