Below are a few highlights from the episode:
[2:00] Have a Plan and Stick with It: In December, a wave of volatility led many investors to abandon some basic investing principles for what they perceived as greener pastures. “It was bad,” Drew recalls, “They sold 50 billion odd [dollars] in equity mutual funds and ETFs, and there were significant outflows in fixed income as well.” But soon after, in January and February, the market rallied and offset some of the earlier losses. The investors who had sold at the bottom were now on the wrong side of the move higher. In these situations, Brian often reminds investors about the true cost of a market correction, “First, they happen every year. Second, volatility doesn’t equal losses until you sell. Third, they tend to happen around policy mistakes. And fourth, shifting to bonds or cash for the long term is not optimal.”
[10:00] Thinking Optimistically About Change: According to most metrics, society is doing better today than ever before. “In the past 30 years, we've seen almost the complete removal of extreme poverty. Today, 8% of the world still lives in extreme poverty, whereas 50 years ago about 50% of the world was living in extreme poverty,” says Drew. We’re healthier and wealthier because of the broad improvements in government and the exponential growth in technology.
[17:00] Machines, the Greater Job Destroyer or Creator?: It’s common for people to fear a world where automation and robots take over the workplace. “The reality is the unemployment rate has stayed relatively low despite a decade of rapid technological innovation. In fact, the unemployment rate is near record lows and GDP per capita, which is our best measure for wealth, is higher now or nearly as high as it's been at any point in history,” says Brian. That’s telling for how people will likely overcome the next wave of technology. More important, this rapid growth in technology may even help preserve some of the world’s most scarce resources. Technology has led the U.S. to become more self-sufficient on natural gas and other energy sources which they traditionally imported from foreign countries.
[22:00] Politics and Investing Don’t Mix: Most people are drilled into what’s happening in Washington from day to day. “Politics today are more partisan than ever before,” says Drew, “But you and I [Brian] both know that the government is not an investment strategy.” That’s a big part of the OppenheimerFunds’ Compelling Wealth Management Conversations. The program is meant to remind investors that volatility is a normal mechanism of the market, politics and investing don’t mix, and stay the course when all else fails.
World Financial Podcast Episode 52:
The Principles of Sound Investing
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