I’m f’ing mad — ‘firing’ mad about some angry reader who admitted to losing money in the last crash! This is what he confessed to a more supportive reader of P. Switzer in the feedback section below yesterday’s article on www.switzer.com.au:
“I've been burned during the last stock market crash and never again,” he opened with.
But wait, there was more from this poor guy who’s got me so mad that I’ll fully answer him. Here goes:
“I want full disclosure. How much of his own money is invested and in which product?,” he demanded of me!
What follows is my reply.
The bulk of my superannuation is invested in stocks! I wouldn’t advise my financial planning clients to do this because it’s a high-risk strategy but that’s my profile when it comes to risk. I understand the risk-reward equation and, maybe in a year, I’ll take some off the table, when I fear a big market pullback or crash.
“Why do we not have the right to know this if he is selling us his financial advice?,” he continues.
You don’t have the right under the law, even if I was selling you financial advice but I’m not selling you advice. I’m giving information free to readers but I do pay writers, editors and admin staff. Sure, we get ads but I can’t help investors for nothing. I’m not that rich!
He goes on.
“Switzer is selling his superannuation products and page views, nothing more. He sells optimism to make himself rich. He is encouraging people to risk their life savings into the stock market when everyone knows another disaster is just around the corner. Shame.”
This is what really got me f’ing mad! I don’t have any super products to sell. The ads that appear on our site can be in the AFR, The Australian, the SMH, etc. I never endorse any ads on my page but I do reject ads I think are misleading. Get rich guys and their pathetic schemes don’t get a run on our site.
This bitter individual thinks there’s something shady about making money via page views and thinks I’m falsely selling optimism. Well now he’s really got me mad.
Time for some history. I don’t crow much but this ‘so and so’ deserves some truth.
I started writing about how the stock market would turn in late 2008, after I thought the US government and Fed plan was bound to work. I pointed out to readers that after a crash of 50%, we’d need a 100% bounce back, so it would take time but in the first year of a comeback, the bounce can be huge. So after March 2009, the spike was over 30%.
And now the S&P/ASX 200 index is up 83%. If you add in six years of dividends of 4% (to be conservative), we have put on over 100%, so I’ve hardly misled anyone.
Along the way, I copped ‘experts’, who bagged me when the US lost its AAA credit rating, when Europe looked like it would slip down a Greece trap, when Jimmy Chanos was shorting China and when the Arab spring rattled markets, etc., etc., etc.!
I stuck my neck out when a lot of famous finance journalists, fund managers, brokers, overpaid academic documentary makers and TV reporters were scaring the pants off people. I was right and they were wrong. And they compounded the GFC crash problem. Not only did heaps of people lose a lot in the Crash, they then went to term deposits, locking in say 5% or 6%, and missed out on the bounce back! Why? Because they were misled and these are the people who deserve a bagging but my reader wants to give it to me!
I’m f’g mad because this bitter guy has lost money in stocks with bad advice — either via a D-I-Y or an adviser — and he thinks I’m risking other people’s money.
How do I make people invest? I have influence over my financial advice clients and started writing my blogs for them so they’d know what I’m thinking. Eventually, we took it to a wider audience.
But let me make this clear: our financial advice firm would pass the test as the most honest financial advice firm in Australia. We’ve been rebating commissions before the Government started moves to reform this. We charge flat dollar fees and started doing this when we were in such a small minority.
A short time back, a well-known financial commentator wanted to do a directory on financial planners doing it the most transparent way —our way. There were so few then that he didn’t do the directory because it would’ve given our firm so much publicity!
Our way is not the most profitable way but it’s the way that doesn’t threaten my brand that’s been built up over 30 years of giving public money education for free!
Personally, my collection of shares pays good dividends and I’d keep them and buy more, if the market crashed and I missed seeing it happen. My attitude to stocks is driven by the belief that over a 10-year period, stocks will have three bad years on average but if you include dividends, they’ll return 10% per annum. Half of this 10% will be dividends.
This chart makes me stick to stocks, even when there are crashes.
This shows that $10,000 invested in 1970, in say an equivalent of an ETF for the S&P/ASX 200 index (and if you reinvested the dividends) ended up giving you $453,166 in 2009, only one year after the GFC crash! At the end of January this year that $10,000 would have been worth $722,110! During the investment period, there were many crashes – 1987, 2000, 2008 — and many corrections! A good strategy (that you stick to) will build wealth.
My critic has made mistakes — heaps of them — but it’s no excuse to bag me. My biggest challenge is to pick the time when I want to go to cash. I know this is hard and that’s why my portfolio contains keepsake stocks! (That said, a few weeks ago I showed that those who got out of a crashing market after a few months ended up having a better return than someone who stayed the distance, went to the bottom and waited for the inevitable comeback.)
I can cop a bagging from Treasurer Joe Hockey and the RBA boss Glenn Stevens as I give it to them, albeit respectfully, but from the critic in this story — no way!
I’m really proud of my record educating people about how stock markets work and the results that have followed. And I hope I get it right in the future. If anyone loses money in stocks, it’s because they wanted bigger returns and were prepared to take the risk. If they’re squealing now, they have one person to blame — themselves.
P.S. The Dow is down about 1% overnight and this should hurt our market today but I did put my money where my mouth was yesterday when the index was down about 80 points, for those who need to know too much!
If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.