Rick Edelman, Morningstar, Donald Trump discussed on Ric Edelman



Welcome to the Rick Edelman show, and yes, a very happy weekend notwithstanding. This incredible cold snap that we've had across the country. The stock market has been fabulous. So far in two thousand nine hundred nineteen. And it's just really amazing. The stock market has had the best start to the year in thirty two years. This is really very exciting. And it just shows to go ya that. If you got really disappointed if you were really panicked and scared and upset or just frankly annoyed at the performance in two thousand eighteen well, how fast things change. So I hope you didn't do something foolish like selling your stock investments. Your stock mutual funds and exchange traded funds in December. Oh, I think you might have done that according to MorningStar investors pulled out a record one hundred forty three billion dollars out of their stock mutual funds in the month of December one hundred and forty three billion because why well we all know why the stock market was doing very poorly at the end of two thousand eighteen the fourth quarter. The last three months of the year, the s&p. Five hundred fell fourteen percent. And that scared a lot of people causing a record one hundred forty three billion in withdrawals in December, and you missed it because year today the stock market is now up six percent. And that's pretty darn exciting. Isn't it? It reminds us of the importance of not trying to time the market to remember that it's about the time in not the timing of your investments, and I'll take it a step further. And there were a lot of folks who were particularly unhappy with two thousand eighteen because of a section of their portfolio that was invested in small cap stocks. Or what do I mean by small-cap? There are three kinds of stocks big companies, medium sized companies and little companies big caps. Mid-size caps and small caps. Cap. Means capitalization the value of a company, and if you had a bunch of small caps in your portfolio, you're even more unhappy than most people because although the stock market fell fourteen percent in the last three months of last year. Small caps fell twenty percent, you know, who's upset about it. Well me for one because my has got a lot of small caps. You see? I need for you to understand. Why history tells us that most of the time I mean like seven or eight years out of ten over really long periods. Small-cap stocks little companies make more money they grow more than big companies. You know, the little companies are more agile when you've got a penny. It's easy to double it. When you've got a billion, it's hard to double a billion, so small caps tend to grow faster than big caps. Now, there are a lot riskier. And this is why it's not appropriate for everybody to do this. And if you don't have the stomach to handle, the volatility, if you all the long term time horizon, small caps might not be a huge great idea for you. But for me, and for gene, my wife, you know, we get it. We understand that investing is about long term. We can tolerate the volatility. We're smart enough and educated enough trained enough skilled enough experienced enough at all of this to recognize that in the long run. At least history tells us small caps, generally usually do better than large. Caps. And so our portfolio tends to have an over waiting of small caps more. So than the market itself would reflect on what about our clients at element, Financial Engines. Well, you can guess, you know, if the client's situation is not terribly dissimilar to jeans and mine chances are their portfolio isn't going to be terribly dissimilar either. I'm not suggesting that that's what you ought to be doing. I'm not suggesting that this is always going to work in the future. We know past performance and guarantee future results in any assertion of the country's a federal offense. But still having said that we believe that having a cap exposure. And our portfolio makes sense. Now, we got punished for that in two thousand eighteen shrugged our shoulders, we get it. We understand that happens from time to time. But look what's happened in two thousand nineteen the stock market is up year to date five percent. This is awesome. Small caps are up nine per se. Percents small caps of Donald most twice as well. In other words, we seem to be going back to the normal kind of environment. Now, these are outsized results. I don't want you to get to excited. I don't want you to believe this trend is gonna continue for the year. In fact, I will guarantee that it can't that it won't for the simple reason that if the stock market continues to do for the rest of the year what it has done so far in January. The stock market will end of the year with a sixty percent gain. And that's not serious. That's the point anybody who thinks that the rest of the year is going to be as good as January is kidding themselves. You're setting yourself up for failure. And in fact, you know, what my biggest fear is that a whole lot of the people who sold their stock funds in December at a loss. Have recently bought them now that they see the market performing better, and they missed out, and they're going to be wondering how come I don't seem to be making any money for my investments?.

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