Manage episode 245705612 series 1702940
Paul shares bear market observations and advice from Sir John Templeton, Warren Buffet and Peter Lynch, as well as offering his own ideas.
He starts the podcast by reading an article by Jason Zweig, "Everything You Know About the Crash Is Wrong". Jason discusses a period when investors would buy funds at 150% to 200% more than their net asset value because the managers could compound the investments at an average of 20% or more. He notes that the P/E ratio and book value of Radio Corporation of America (RCA), at the peak before the 1929 crash, and the present ratios for Amazon are virtually the same. P/E 73 times earnings and 16 times book value.
The bottom line is few saw the crash coming, no one predicted how big the losses eventually would be, or how long it would take to break even.
There are several huge decisions that investors will make. Those life changing decisions will be when to start investing, asset allocation, fund selection, expenses, how to take advantage of bull markets, and how to manage money during a bear market. Anything that gets in the way of making these decisions prudently will likely make much less in the long term. It may be the decision of how to invest in the bad times is the toughest of all.
Paul asks investors to carefully figure out what their primary objective is. “That will give you most of what you need to know about investing in bear markets,” he says. He discusses the difference between how young investors, pre-retirees and retirees should deal with a bear market, and the bear market differences between taking variable and fixed distributions.