What should you do if the market crashes again?

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0:50What's up, Damo? All right, T? All good, all good. We've got some listeners' questions today. Let's get straight into it, mate. Let's get into it. We've had a few questions from our listeners about this current volatility in the markets this year. For example, what's the approach when things go bad in the stock market? What's my approach? Yeah. Yeah, I'm probably a pretty bad person to ask about this, to be honest. Volatility, shmolatility. The reason is because I'm kind of long enough in the investing tooth now to sort of not be phased by these things to the point where I don't even realise they're happening a lot of the time.

1:25You know, from someone who's like a social media person, about the stock market and finance. I tune it out so well that, you know, I find out from the audiences, oh, it's dropped a lot today. I'm like, oh yeah, well, yeah, it really has. For me, it's not really that much of a concern. It's not surprising because these things are part of the market. I think, you know, if you look at the S &P 500 on a long-term chart, about a third of all years are declines and quite a lot of those are significant. It's more likely to get a minus 20 % decline in the market than you are to get the average rate of return of 10 % in a year.

2:00Do you know what I mean? The drops are normal. So people need to internalize that first of all. And then I also, I would encourage you to think about investing, not in terms of what is going on right now, but what is my timelines for investment. So for most people listening, they've got decades ahead of them. So they're sitting there going, okay, well, drops in the market are good. If you're running away from the market when it's declining and you've got 30 years ahead of you, you're running out of the store when the sale is on. You should be running into the store when the sale is on because the declines allow you to buy units of the market for a cheaper price than you could yesterday.

2:36If you are nearer to retirement, obviously, this is a different concern. But your plan for retirement should start five to 10 years before you retire. And part of that plan is accepting that there's a chance that at the point of retirement where you enter into retirement that the markets might do badly. And you've planned around that. You've got cash buffers, bond ladders, annuities, these kind of things. I think it's just that preparation that needs to happen. In a way, if I was retiring in five years and the stock market was crashing now, I'd probably be a bit happy about it because I'd be like, well, hopefully it's recovered a bit by the time I actually do.

3:12What I think is more interesting about this decline at the minute is that it's American-led, it's tech-led, and it kind of rocks the idea that all you need is the big tech companies in America. I mean I hate to say I told you so but I'm gonna say it literally like global fun because we've been relying on America been performing to continue performing as it has been for the last 20 years and is that going to keep happening so it's best to be diversified it was one orange man to come in and the whole thing like you know fell apart validation right there yeah well I just think you know we're not talking politics we're not talking about individuals or ethics or anything all we're talking about is the fact that one man can influence the market so much, especially a person that everyone was like, oh, he's so great for the markets.

3:57He came in and everyone was having a great time. The markets thought this guy is going to be good for the markets. The markets rose, even crypto did as well, right? But then because of his actions, everything is undoing a little bit at the moment. That could change long term, but what it speaks to is the uncertainty around performance and also the influence that individuals can have on the market that are, you know, presidents, leaders, wars, these things can come out of nowhere. And people who, the market can be pretty confident that someone's going to act in a certain type of way and then they act in a different way and everyone gets surprised.

4:34You know, I could say, we can sit here and say you buy a global market, but even the global stock market is is underperforming or doing a little bit badly at the minute. I think you can't avoid these declines. And I think what people need to do is zoom out. So when these declines happen, they zoom out and they look at the chart and they look at the fact that actually it's still only relatively a blip. They also need to zoom out when they're planning their portfolio and go, what's happened today hasn't always been the case. And what I mean by that is American dominance hasn't always been the case.

5:07There have been periods of large declines in the American markets. So from 2000 to 2010, 11, was like a lost decade for the American markets. But I'd also say that zoom out and think, we probably needed this to happen because the American markets have become so overvalued. So have American tech businesses, they've become so dominant that this is almost like a correction. The last couple of years have been great. But it can't continue to go. like that it's not feasible because and it's like this isn't it it's ups and downs and it's just a few bad a few bad days in the office but if you zoom out and go over the last three years the performance has been stellar and this doesn't delete that i mean by the time this comes out it might have done it might be better it might be worse it's like everyone um says like like you said earlier like people run away from the sale like i like i'm a big prefer big fan of by the fun dip btfd by the fun dip or by the effing dip but um there have been so many dips recently my dip bag is exhausted like there's nothing left in a dip bag like you said most people haven't been through one of these dips or corrections before apart from all the people that have ever invested in crypto and you'll be very familiar with this um what i would say is if you have a good investment strategy stick to it when the market dips or when there's a crash the way i don't freak out is because I'm like, I invested for a reason.

6:31I think that this is a good long-term plan. Like you said, like the dips are temporary. So if you can just kind of calm, take a step back, not panic, not like you said, sit on the toilet selling everything because you've seen a dip and you just kind of just breathe and just like take a step back and say, I think this won't last forever. It might last forever, but I mean, you've got to think realistically, is America going to disappear in the next like few years? Do you think America will come back? Is that a question? yeah for me yeah uh or do you think it's time for china no no no i don't i don't think it's i think it's anything like that i think the the the markets are a reflection of uncertainty and i think you know people are just selling because they don't know what's going on and things feel like they're changing um i think you know a long-term bet on an on america on the american economy is probably still as good as it was it might even be better now because it's a little bit cheaper yeah i think what's happened is that you know the american markets have become overvalued by by most metrics and there's been an over-reliance on a few individual companies within that and then you add in this kind of ai narrative and people just love that sort of everything's about to change the amount of times that's been said over the last few years ai evs all this and you know we're all still here wiping our asses with these, I mean, it's the same, the world doesn't feel that much different.

7:56So, you know, I think this kind of, this was a bit overdue and corrections feel horrible to people and they ultimately question if they should do something. I think what they probably need to realise is the media is really incentivised to make it feel really bad. If you just step back and zoom out and have a look at it, it really doesn't look that bad. My silence on the topic is reflective of what I think people should do, which is absolutely nothing. You know, this is why I've not made any content about it because I just don't want to feed into the panic. There's so much news coming out. Like it's all doomsday.

8:29I think I will make a video and just be like, yeah, just chill out. Relax. Tranquilo. Yeah. What's that? It means chill out in Spanish. Oh, does it? How many languages do you speak? A couple. A bit Latin. Tranquilo. Tranquilo. Oh, tranquil. Yeah. Yeah, good. vocab a bit of latin as well got a bit latin in me but you know what sorry you asked me by languages i'm like a bit latin a bit french a bit spanish um but some people and you're nigerian i do yoruba it's a nigerian language you are what you're oimbo that means you're a white man but yeah yeah it's a term of endearment is it is it racial slurs on the podcast it's a term of indian um what are we talking about you got me oh yeah a lot of people are thinking that trump is just kind of doing all these terrorists crashing the market things are going terrible but after like six months a year of like uncertainty it could be a very it might be it could be a great time for america because like he wanted to uh weaken the dollar he's weakening the dollar lots of things have to go in the right direction but it could be setting up for like next few years of like great returns i don't want to be pro or against trump i don't think that this is the place to have that kind of conversation go listen to you know a politics channel but what what i think we can say is we're uncertain about the future and you know there's there's a world where what trump's doing might might work out but in the short term the uncertainty is what's causing choppiness and people you know in the short term tariffs and things are going to make things more expensive for people on the ground and are bad for businesses because they can't you know it's more expensive for them to do the things that they would do consumer more expensive for the business yeah so that's and the markets are reflecting this long term who knows but again think about timelines when you think about investing don't think about the day-to-day and just because something was worth this yesterday now it's worth that don't think that that prompts you to act it doesn't mean you should do anything our next listener's question is from matilde she asked how do you reconcile wanting to invest but also needing to save for so many life projects holidays house extension wedding etc um we can probably relate right there's always something you want to buy always i think you've got to kind of prioritize and realize you can't do everything you can't have everything um i mean i would love to be on all the holidays all the time i used to be yeah then i had a kid and now i'm like oh i should probably save some of that money yeah i think you know you're basically saying i want to spend all my money but i know i need to invest because you got to took away a bit.

11:06And I think the first thing you do is you pay yourself first and you go, I'm talking away X amount for investments and the rest I can blow. And you give yourself a budget and that money that you took away for investing, you know, it's for your long-term future so that you can continue to go on the holidays and stuff. And you prioritize that. I put that ahead of all of the spending. And then the other stuff. Yeah, I mean, you're probably better at this than me, mate, because, you know, I'm like, how do I cancel the holidays so I can save more money? uh yeah i mean i was meant to be i meant to be going to barcelona next weekend but as you're aware i haven't paid my tax yet so i was like i should probably pay my tax bill before i go on holiday you let the boys down last minute yeah i did you know what i was like i'm not coming i'm not coming um yeah just because like normally i'm always ready to go on holiday but yeah you've got to as you get older you've got to just prioritize things um for me like like you said pay yourself first the investing is kind of i've made it non-negotiable because i did so longer of not investing just buying what i wanted spending going on holiday i'm like yeah um and then i started i'm like oh bitcoin will go to a million i'll be rich i don't need to invest i'll just buy that and then as you get older you realize okay i need to actually be a bit more serious so many of my friends are like how i used to be they're like oh i'll figure out my pension later oh um my my work could do my pension i'm like do you know what they invest in is i'll know but you know it's fine so once you are it's okay to be ignorant and like you don't know any better and you're like, oh, I've got money.

12:30I've got a grand. I'm going to go spend it. But once you know I need to save my retirement, my LISA, my kids' ISA, this investment, the market's gone down, I can get better value now, I just do my investments first. Once that's sorted, then I'm like, okay, what do I have left over? So for me, this much is like do investments, pay your tax, and then if there's anything left over, you can enjoy it. But I think you've just got to have rules and stick to the rules. Yeah, and you don't need to over-save, do you? I think it's like 15 % for retirement savings, including the matched contribution from your employer, dependent on your age.

13:03So as long as you're tucking away as much as you can, enjoy the rest. That's what you're meant to do, aren't you? Our next listener's question is a topic close to Damien's heart. Ian wrote, you've mentioned in the past to avoid using robo-investors like Moneybox, who will charge high fees to simply put your money in an index tracker fund, and that it's easy to just do this yourself. But how? Using what platform? what process okay so you know if you're not comfortable doing this yourself there's nothing wrong with the does the fees are high for them to be uh a middleman and what i'm saying is i think most people are able to do the process themselves and my issue with robo advisors or robo investing platforms is they say we you know we take the complexity out of investing and we do it for you and it's like you're making it feel like it's more complex than it actually is what i would do is for every robo investor you can access what funds you're in so when you click on the option they'll call it like a balanced or owl or some kind of weird name you click on it and you go through and it'll tell you what funds you're in and you could literally just go and buy those funds so if they're vanguard funds that you're in you go on the vanguard platform and you buy them most of the the robo advisors and investors will be buying global indexes typically and then some level of bond allocation based on the risk profile that you put yourself through so if you said oh i'm worried about the stock market dropping and that they'll put you in a more cautious portfolio whenever i looked at them and this is going back years now a lot of them were just vanguard funds so you know you could go to this you could go directly to vanguard and buy the exact same funds yourself on the vanguard platform and cut out their fee so just go on to the platform find out where the section is where it tells you what the funds are that they buy and go and go direct to the person who provides those funds.

14:57Or if they don't go and look at, you know, Trading 212 or whatever, we keep a list of the brokers that we use in the description of every video. Those are all brokers that I use personally, Trading 212, Invest Engine and Vanguard. So on one of those platforms, you'll be able to find the funds. Vanguard only sells Vanguard funds. So if it's like a BlackRock or something like this, Trading 212 Investing, you know, any other broker in the UK, they're just charging you a fee to get in the middle of that process. It's like going to the wholesaler rather than going, you know, to the corner shop, to Bossman.

15:33Bossman. Yeah, I like, I use Trading 212 and Hargreaves Lansdowne just because they're like, actually Hargreaves isn't that simple, but Trading 212 is pretty simple, but Hargreaves Lansdowne, they've got the prestige. Reassuringly expensive. Yeah, reassuringly expensive. I'm like, ooh, that's a bit of me. They're definitely going to keep my money safe. They're expensive. They're going to keep it safe in their pocket, mate. Take all their fees. No, they actually, they're upping their game in a lot of ways. So like their junior ISA product is the best on the market. That's what I got, yeah. Yeah, well, there you go, because it's free.

16:04You're showing expensive. Look at you, mate. Why do you always have to dig me out? Funny, man. They didn't know. Oh, my broker at Hargings Lansdowne is your kid's broker, mate. Wee. But yeah, it's cool. And their lifetime Lysa as well. oh is it good yeah well i don't know i'm gonna have to get you to check it out for me question from bagosaurus what are the easiest ways for beginners to invest in gold so i just want to carry out this by saying i don't really own any gold i bought some gold once on the channel um as like a little experiment just some you got your little gold bracelet on oh yeah yeah he's got a piece of gold on a string he can't afford the whole chain so he just got the string my gold's on the chain yours is on a string so there's levels to this there's levels yeah yeah so i don't buy any gold really for investment purposes but i think like the probably the easiest way is to buy a gold fund like an etf or an exchange traded commodity you can buy them on brokers yeah one of those because you don't have to worry then about this the storage costs and the safety you know if you've got gold bricks in your house you might get robbed yeah you might just store them in a warehouse like gold billion but you have to pay like you said storage fees so it does get a little bit annoying yeah so i was watching a video the other day and it was like on tiktok and it was like oh we we found an abandoned bank and we found silver in it um and they had all these silver bars in in the drawers and someone in the concert that's a lie because silver tarnishes so if that silver had been left there in open cases it would have gone weird on the outside and i was like yeah because it's got to be like the right humidity and like the right temperature and all these things to like store store the gold yeah i don't to worry about all that you know because what's the you how you buy this thing as an investment and then it's the price of it's getting you you're it's got a cost to maintain it whereas if you buy a gold fund the fees involved which pay for that but you don't necessarily have to worry about that as much i think it was the introduction i was looking at this the other day the introduction of the gold funds in about i don't know when it was 2004 sorry chat might be wrong just a average oyumbo here trying to try trying to get it right um but after after the introduction of the funds like the price went up a lot because like the ability to purchase gold became a lot easier kind of like the bitcoin funds you know like they thought the price they would expect the price to go up still waiting tell me about it million pound bitcoin any day now any day now but yeah so that's the easiest way i'd say because you don't have to worry about all the other things But I guess the key question is why are you buying the gold?

18:41Are you buying it because it's gone up a lot in price recently? Or are you buying it because it's part of your broader portfolio strategy? I'd really encourage you to ask that question. They say gold protects your wealth. It's a hedge against inflation. Yeah. Is that an old wives' tale? Is that actually a hedge against inflation? I think there was a really famous paper. and that paper said that it is a good hedge against inflation, but only over long periods of time to the point where it's not useful in the sense of you would do it for family estates. Intergenerational, not for yourself. Yeah, but then at the same time, people in the comments are going to be like, what are you talking about?

19:23Gold's done really well over the last few years. So maybe that paper needs updating. But yeah, I mean, the stock market tends to be a good place to beat inflation long term as well. Last time we recorded, Tomei, and you were having some real dramas with your accountant. So how's that been going, mate? They're sacked. So drama sorted. They're a big corporate firm. They didn't really reply to my emails very quickly, like took a week or two at times. And they charged me way too much. I mean, I've got pretty simple taxes and yeah, they were charging me thousands. They saved me some money, but yeah, I had to move on.

19:59Slow and expensive. Pretty much, yeah. This is one of the reasons that we're really happy to be partnering with TaxApp. It's a tech platform that makes self-assessment simple. Whether you're self-employed like me, a freelancer or a director like Damo, big dog. Instead of sending endless emails, bills and spreadsheets to your accountant, you just connect your bank, answer a few questions that are only relevant to you and your tax return can be ready in as little as 15 minutes. TaxApp is really easy to use and it's HMRC recognised software. So it's safe, secure and legit. The price is also decent.

20:27So if you're self-employed with one income stream, it's just£89 as a one-off fee. no big accountancy fees and we also have a discount code of course if you need to file a self-assessment this year give tax app a try we've left a link in the description and use the code money10 for 10 % off your first tax filing that code is money m-o-n-e-y one zero so mr carolet i hear you are a salesman elite salesman yes one of the best they say i've got a little bit of experience in the game yeah i could say i've done a few deals uh a bill a bill what what would your compliance team say about you they will say that i am always nagging them and that um essentially i just have i have beef with compliance i love the team compliance slows down all my deals because every time i get to the finish line they've got to check documents kyc uh gdpr and it's just a nightmare it slows the deal down by like two three weeks it's always on both sides as well as sometimes it can be blocked on the other side exactly well that's where today's sponsor can help.

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22:04That's vanta.com forward slash making money. There's a link in the description though, so you can just click that. The next question is from the Giggle of Steel. Great name. Now that more than 50 % of the stock market value is taken up by passive funds, and this is probably growing, is the market still as volatile and subject to extreme crashes wow wow wow so first of all the the market has been more crashy since the year 2000 than it was previously remember the the lady we had on the economist and she said that half of the major crashes that she'd studied had been post yeah the millennium so it's actually kind of more crashy um not less and you would think that or people might argue that if the market was passive, it would be less crashy because there's less people kind of buying and selling.

22:54But I actually think that the bigger trend that's maybe leading to the markets being a bit more volatile is the ability, the ease of purchase and sale. So the ability for retail investors who are buying passive funds, who don't really understand what they're buying or how the market reacts, they've not really internalized from question one that crashes a normal, have this ability now to get out of the market in an instant. They can see a news headline or a clickbait title, and they can sell their whole portfolio in 10 seconds. In the past, there were lots of barriers to receiving information. You have to go and get a newspaper.

23:32Or if you didn't walk past the headlines that day, you just wouldn't see it. Now you can't escape it on your feed. Or you would maybe have to watch a certain channel. If you turned on the TV at the wrong time, you didn't see the news kind of thing. and then there was the you had to internalize that message go away and go okay well now i'm going to sell pick up a phone call your broker get through to your broker who's then probably going to be like trying to talk you down and be like you probably shouldn't sell everything there's all these barriers that just allow people to cool down now you know think about impulse buying products i see a product on instagram buy it it turns off it's always always a scam always a scam um but but you know that impulsivity in humans feeds now into the market and i think that's probably leading to wilder swings because of the the amount of retail investors in passive funds that they can just dump we got we we found this thing in the economist it's like this dystopian story that they tell that is sort of the it's like the the fable of active investors where they describe a world that in 2034 here, they say that the whole of the stock market is just the Magnificent Seven and NVIDIA make up like 80 % of the market and all of this stuff and the threat that that would pose to the economy.

24:46I think, you know, what the active people don't say is the threat that they pose to people's portfolios is the extraction of fees. And that's a very certain risk, you know. All these guys talking about how passive investing is so dangerous while they're creaming 2 % of your portfolio off the top to not beat the market is just as dangerous. But anyway, you know, 50 % of funds are passive, not 50 % of the market. You know, people say this all the time, 50 % of the market. No, 50 % of funds, there's still 49 % of active funds. And then there's a whole load of other people that are just buying individual shares, including most passive investors.

25:24I think there's a long way to go before passive investing completely dominates the market. maybe it leads to some kinds of distortion within the market money just flowing into the hands of the biggest companies and things like this but they've been saying this about passive funds now since they were basically created and lo and behold they've just kicked the ass of active investors over that time it is in their best interest to try and drive people towards active because they're getting that commission well this is it and you know smart people like to think that they're smarter than the dumb option and you can beat the market and you're like oh i can the one thing that the one thing that's going to annoy me is the day the one year which will happen where active investors beat passive investors and they'll be like i told you and it's like you've been wrong for 20 years you know you can't just go the one win the score is 20 nil you scored one goal and you're celebrating do you know what i mean it's like you've been battered but i think i think a lot of people start i mean a lot most people start off like actively choosing their stocks and shares right when they start investing and then move to passive funds i think um yeah so i mean they still kind of they've got a lot of drive and momentum behind them so everyone's like oh i can be smart i know amazon's good oh i want to buy netflix i'm going to beat the market and then this is a really good point to you so you know the assumption is that anyone who's active is somehow smarter and making intelligent decisions how much of the active market is just people buying the hottest stock of the moment and distorting that price how much of invidia's rise has just been because people have seen the line going up and they've just got involved so many people tell me buy invidia buy video and i'm like you this is the first time you ever talk to me about investing and you're telling me to buy a specific exactly so it's you're funny telling you you're where's where's your podcast yeah little baby tea look your capital team mate lowercase t's out here telling me what to do lowercase t's um no but it's a good point isn't it all these people criticize passive investing because of its passive nature and it just buys the market and it might distort the market but if everyone was active and you just got people running around buying whatever's going up in price is that not going to distort prices i think i think the biggest shift is just the ease of purchase not the fact that passive funds are there i would rather every normal joe like you know like every normal person being a passive fund than be going oh well i've got to actively pick and i think what a lot of the active side of things is saying is well you know you need to pay us to pick for you and i'm just don't see credible evidence over you know a long time horizon that those guys consistently are good at doing that we're not even answering the question here the question was about volatility and choppiness since the rise of passive it's become probably beyond 2000 i mean it started in the 70s really kicked off in the 90s 2000s the markets have have been choppier but you're going to blame covid on passive funds you know there's a lot of factors and especially the ease of being able to buy and sell and like you said like people used to get newspapers and but by the time it's printed it's the news is already 12 hours late or whatever and by the time you read it it might be like the end of the day so you're reading at 5 p.m but we see on our wake up and the first thing i see on my like i get messages on telegram saying bitcoin for us i get this about nvidia for us i get this just you know about the California fires, whereas in the past you wouldn't have even known that was a thing.

28:42You know, back in the day, you'd have known the next village down. Now it's, you're just a constant news feed of the world's dramas. To quote Billy Joel, we didn't start the fire. The world was, the world's always, yeah, since the world was turning. Yeah. So, you know, I think it's the speed of access to information, the negative news cycle, and then people's kind of reaction to that and the immediacy that leads to more choppiness. I don't think it's necessarily passive funds. Next question from Adam. I invest in the FTSE Global All Cap Fund via Vanguard. When does Vanguard meet to decide which companies are in the fund?

29:19When they switch companies in and out, how does this affect my investments? So it's not Vanguard. Vanguard have a fund, a pot of cash that tracks the underlying index. So what Adam, sorry, is asking is when does the underlying index change? footsie uh in this case footsie russell um it's every march and september it's twice a year but basically they can they can meet every quarter every six months annually there's lots of different but they change it twice a year in this case but it depends and if you look at the index they'll say how often they meet and and when they decide and certain funds are much more kind of passive in their approach to this where it's like if if a company is of a certain size it's in the index whereas other indexes they take a bit more of a view so the s &p 500 if you remember from our conversation with toby newbat he was saying about how they'll weigh up a few things not just the size of the business they'll look at you know as to fulfill all the different criteria yeah before so it's it's kind of more active in a way it's not it's still relatively passive but yeah how does it affect your investments well the idea is that over time the losers fall out of the index and are replaced by companies that are growing at a quicker rate and you know you shouldn't see moment like momentary declines for to have a huge impact imagine an nvidia would have to decline significantly and fall out of the index this would be huge i can think of companies say like an enron imagine where it suddenly turns out that what is a huge in company is just a fraud then you're going to notice a big impact but for the duds to fall out the bottom i'd say that they'd have been on a pretty significant decline for a long period of time i can't really think of massive companies that are huge parts of the index crashing and burning in an instant there was the company in germany that was also a scam i can't remember what that was yeah so it's mainly because i mean even like BP did their big oil spill they like polluted half the ocean and they still stayed you know I mean so it's like you've got to be doing something fraudulent I guess or performing really badly.

31:32For you to like wake up one day and for you to notice the significant reaction in your portfolio as a result of a company leaving the index that company would have initially had to have been a big part of the index because of the way that their market weighted like the FTSE global all cap the businesses at the top make up a large portion of the fund the ones at the bottom so the ones at the bottom of the index are pennies yeah so you've got like one p in this business say and it's getting kicked out and then another company's coming to replace that one it's not like apple are getting dumped and then you would notice that so another company's coming in so the ones at the bottom of the index so if there's 500 companies in the s &p 500 but the top five companies make up 25 of the index you're sharing 75 of the rest of the pot of money between the other 495 businesses so the ones at the bottom who are the ones that are being kicked out are literally getting pennies yeah yeah heather wrote in could you give recommendations for older first-time investors with only 10 years until retirement recently inherited 20k to place somewhere but where never had any spare money so only state pension to look forward to no i mean you've got 20k there and you've got a long you've got a relatively long time horizon.

32:44So I think there's other things to look forward to. We did, you know, where to put it, there's lots of options, pensions, ISIS, these kind of things, and it all comes down to your own personal circumstances, of course. We did a webinar with Lisa Conway Hughes based on what to do in a lump sum and some of the options I think could really help you, you know, form your own idea around that. So we'll link that below and give that a watch but you know the basics are do you have a good do you have a good cash buffer emergency fund are you maximizing pensions and and ices and these kind of things the common wisdom is that five to ten years out from retirement you start thinking about that approach to retirement so that would be making sure like you know the cash buffer point that when you start drawing from that income that you're not kicking the portfolio when it's down if the market falls at that point so yeah i think first of all just give yourself give yourself a break there's lots of time there 10 years my life completely transformed in 10 years in terms of investing mine in like one year there you go pretty much like a year yeah yeah so you can do a lot with 10 years and you've got a good base there in terms of the 20k to put it to work you know go on how much cash buffer do do they need or how much it depends it depends on what their what their spending is and i think the other point is the um the sequencing risk around taking money out of the portfolio at the point of retirement and if it dips it really hurts the portfolio long term so most people will look to have some form of mitigating strategy that they can lean on so that they don't they don't do that if the portfolio dips you know they don't have to lean on it and you need to be preparing that strategy aka you need to be saving up that money five to 10 years out, five years out, so that you have got time to save it.

34:35Because you're talking maybe one or two, three years worth of other money. So it's, you know, it's going to take you a little bit of time to build that up. I think 20k is a great place though. And things like pensions, you know, depending on working circumstances, if I stuck 20k in my pension and I was a full-time worker on a higher rate, I'm going to get the tax back on that as well, which is going to boost that money significantly and then you've got that to work also consider heather do you want to retire you say your x amount of years from retirement have you set that goal could you work an extra year could you be part-time there's loads of ways to make this work um would it would it be different if you're investing for like a longer time period than just she said 10 years yes so the hard thing about 10 years let's say you have to retire in 10 years the hard thing about the 10-year timeline is you both need to and you you haven't got anything is you're in the accumulation phase but you're also facing the period where other people would start to strategically think about how they approach the decumulation phase if you climb in the mountain you're you know you're three quarters of the way up the mountain about to summit and you know you've got to come down the other side so it's kind of like you're in both yeah if in an ideal situation you you would be approaching 50 55 and you've got the majority of the money.

35:53But even then, even people at 50 who have been saving, say, since their 20s, most of the compounding will occur between 50 and 60 because that's the nature of compounding. It's like a hockey stick, isn't it? 10 % of the balance at the end is well more than the start. So even those people in their 50s are going to want to stay in the market and maximize returns. They're not just going to want to be tapping the brakes because that's when they're getting the most benefits from the effects of compounding. So, yeah, I think the key thing is that 10 years is plenty of time. You can work longer than that as well.

36:27And just remind yourself that you're going to be investing in some way, shape or form until the day you die. So potentially there's 40, 50 years ahead of you there, which might even be more than you've had already. Watch the webinar as well, because, you know, straight from a financial advisor's mouth, much better than we could ever think of. Billy wrote, I've just started my first pie on Trading 212. I'm invested in Vanguard S &P 500, NASDAQ 100, and Vanguard FTSE All World. Is that diversified enough? I feel I could be missing out. Thanks for everything. Your free course has really helped me get to this point.

37:02I think, Billy, have you considered that you might be overlapping quite a lot there? So you've got the S &P 500, which is the top 500 companies in America, which is a lot of big tech businesses as well. The NASDAQ 100, a lot of big tech businesses. and then the Vanguard foots your world, which is the whole world, but 65 % of it is going to America. I think if you looked at your portfolio allocation as a percentage, you're going to be about 80, 90 % in the US market. So I actually think that you've, in an attempt to diversify, you might have overplaced chips on a single number. If you think about it like a roulette table, if you said, I'm going to put chips on the number three, and then I'm going to bet in the first third and I'm going to bet on the whole board.

37:46You end up putting loads on number three. You overbet on that number. So yeah, consider that. You've bought the world already and then you've added in more America and then more tech in America. So yeah. And the free course is amazing. We'll link it below. But yeah, I think, yeah, maybe try and find a way to look at the percentage splits. I think most people do this, don't they? They go, I can't decide whether I should have the S &P. 500 or a global index so i'll buy both yeah i did the same thing yeah and that's cool but then he also did the nasdaq 100 so he's just super exposed to tech stuff so yeah i did i did both because i'm like i believe in america but global gives me more but by doing that you're actually more in america yeah so you end up you end up instead of 65 america which is the way the market is structured at the minute you end up say 80 by going 50 50 and i think a lot of people miss that point but because the s &p 500 has done so well in recent years you know that strategy has actually worked but that's not through it's not like people understood that that was the case it's like you were eating both like yeah you're eating from both you just so happen to be you know exposed well to that market but yeah it's it's again it's you know if if that's happened if that's worked for you great but if you didn't know that that was the case and you weren't making that decision consciously well you just kind of got lucky and if it swings the other way are you really going to understand why and you're going to be like well hold on why is my global index down that much but my portfolio is down this much yeah overexposure so would you say he is is he diversified enough it's funny because it's like it's trying to be diversified but it's all in america i feel like his question is like should i buy more yeah and my question to billy would be should you buy less yeah should you do you need all of that like why are you doing all of that If you really back American tech or the American markets, then, you know, go for it.

39:42But I think it's kind of like he's thinking, oh, maybe I should add this or add that or add this. The benefit of a world fund is that you get everything. So you're already diversified. Like just being in the world fund is diversified. Yeah, because, you know, you have company risk, which is if I buy an individual company, the risk is that things go wrong. Like the fraud, the Enron thing that we were talking about before. So, okay, I can expand that out to sector. And the sector is I buy every business within that sector, so I buy every energy business. But the threat then is that energy companies underperform or we have a thing where airlines are all grounded.

40:17And even if you owned all the airlines, you can't escape that. Country risk is I'll just buy the American market, but what happens if America does bad? Okay, globally, I buy everything. There's nothing beyond that besides buying different types of asset classes. but when you start to bring in different assets into a globally diversified equity position a lot of them will take away from the return so like bonds you know you can dilute down the risk of them dropping but you probably expect a lower return long term so once you've gone global you've kind of they call it the only free lunch and invest in so that you diversify all of the individual risk away and you buy the whole globe like you own the globe so you know you're going And I own the globe, I own America, and then I own tech in America as well.