Welcome to today’s video. It is the first on our brand-new web series called “Retire on Rails”. The series is all for digital nomads by digital nomads. We are going to take you through some financial planning lessons.
Some of this is real traditional stuff but we are also folding this in with a 2021 modern digital nomad application. So, we are going to be going through some real-life scenarios for you, which really should help you get to retirement early, using the FIRE model; Fixed Income Retire Early.
A lot of you guys out there have already done well. So, boom to bust! So, you might have already been a crypto kid who had seven figure returns; you might have e-commerce platform that is giving you a really good residual income, or you might even be a diamond fist who’s holding tons of game stop.
Or alternatively you might just be starting out and looking for some basic advice. So, this series once again is going to be for you. It is not to be taken as financial advice. This is simply me giving some of my education out there. If you are going to be taking on some financial advice of doing some investment, please make sure you speak to a professional.
So, let us get started. A little bit of history about myself. So, I have studied financial planning in three different jurisdictions now. I studied it with the charter institute for securities investments, which is UK based I have studied in Australia with Kaplan and I am currently studying with Solomon in the USA.
So, I have got a broad range of financial planning knowledge, because it comes from three different schools and my background is in e-commerce, so I worked for a car company in Australia called “Holden”. I work for the City Holden dealer network, doing e-commerce before e-commerce was really a thing, this is going back years and years ago.
Basically, teaching dealerships how to sell cars online; how to do stock price matrixing; how to handle the data; how to get it out to the salesman. So, that is my background guys. So, I really hope you enjoy today.
Today’s lesson is an important one. Therefore it’s the first lesson. It is something that I wish I had of not l learned because I learned it early on, but I just did not put it into practice. It is one of those things where for some people you kind of must learn by your mistakes but don’t do that, learn from my mistakes.
I am going to tell you the mistakes that I have made before using Tesla as an example and then showing you how you can actually use that model to make yourself some really good money and if you do this right, this is going to help you retire early.
So, let us get your “Retirement on Rails” going and let us get started with today’s lesson.
Okay, so you’re either going to walk away with today’s lesson learning one of the core fundamentals if you’re an amateur. Even if you are a professional, you probably should watch this video again just to give yourself a bit of a reminder. Cool!
There, if we want to be binary, are two different kinds of investors. There are day traders who might be trading two or three times a day, buying, selling, looking at resistance, measures Bollinger bands candlesticks, opens closers, all these kinds of things. If you do not know what any of those terminologies are, then do not worry you probably fall into the majority category, which is the buy and hold traders.
So, people who look at different sectors such as say electronic vehicles, renewable energies, biotechnology and buy into those messages. Biotech Crispr now is amazing 3d printing is coming up automation and robotics. There’s a whole heap of areas people are looking at e-sports as well.
So, if you fall into that category, which is probably the 95 plus this lesson is for you. If you are a day trader, good luck to you. It is not something that I do myself because it is just too easy to lose money and you miss out on tons of gains. This is how you miss out on those gains.
Let us have a look at the calendar above us, if we took March 2020 g’s, 2020 what a crazy year with covert and all that. This is what it did to the market. So, if we look up here Thursday, the 12th was the worst day in the markets in 20 years but Friday, the 13th was the best day in 20 years. If we go back to 2015 if we look at august, the 24th of August was the worst day of the year and the 26th of August was the best day of the year. So, what we know now is that typically in markets, the best days of the year always follow the worst days of the year.
Now the funny thing about data or data is how you can make things support your own argument. You can pick your data points to prove pretty much anything you want. For this sake what if we just avoided the 10 worst days historically. Well, you would have performed much better than just participating in the best days. So, kind of leads you to the argument, well why don’t we just avoid or just miss out on the 10 worst days?
Well for this reason you do not have a crystal ball, remember that one. Market crashes are much like car crashes. They are quite often fast unexpected and catastrophic. You will not ever get a warning on Bloomberg in the morning going, “there’s going to be a market crash tomorrow”.
So, the first thing to understand is that is it even the absolute best experts in the industry guys who trade for a living, never can predict the exact date the worst days are going to happen. So, by the time the worst days are upon you, the damage has already been done. Also remember that the best days quite often come after that.
Here is how the scenario will typically work out for you; you wake up you read the news the market is down nine percent, and everyone is talking about how catastrophic it is and how this is the end of Rome. Everything is burning down!
I can show you some clips from back at the crash in March of 2020 when all the wall street guys are going, “This is fundamentally changed, the world is never going to be the same, sell everything basically”. So, you make the smart decision, and you sell your stocks and in the next day or two, you miss out on the gain.
So, this is more likely going to mean that you are not only not timing the correctly on the way out. You will also miss the next jump up in stock prices. This is the very definition of sell low / buy high, which is the opposite of what you want to be doing.
Let us use Tesla as an example here and as an example of why you should always be in the market. So, this is Tesla from January 2019 to February the 14th, 2020. Now Tesla you want to buy some Tesla, but it has already gone up 151%.
You save yourself Tesla’s too high, it is too expensive I have already missed out on the boat, it has gone up 151% it is never going to, you know it is always going to go down, it is never going to go up, I kind of miss out on the Tesla investment.
If we look at the red line that is the S&P 500 comparison, which had gone up a respectable 31% over the same period. So, Tesla is now in a bubble. Okay, now let us look at the next chart.
This is from that same date February 17th to the second of sorry February 17th to March 16th is the next one. So, now Tesla has gone down 44%. So now Tesla is actually a good time to buy but also if you are already buying Tesla, you are 150% is now 110%.
So, you are going, “Oh geez! maybe I’ve made 110%. I should be selling now. I have had a good run of it. Tesla’s over, you know Porsche is going to take over or BMW”, or whatever reason it is you tell yourself that the game’s over and you know time to get off the Ferris wheel and so you do that.
Now, if you have done that you would have missed out on this one, which is taking Tesla, the final chart from February 17th, 2020 to February the 2nd, 2021, which is as of today’s date. Okay, now Tesla has done 395%. So close enough to a 400 percent gain and we see back there that what is now a little dip.
So, this is the exact example of why you buy and hold, have diamond fists, do not have paper hands, do not sell out as long as the company has good fundamentals. So, that is the lesson.
If we look at it on charts, so let us look at the last 20 years what would have happened. This is the final chart guys; I am trying to make this as quick and as painless as possible for you. If we look at this, if we had a stayed invested from January 1st, 1980 until the 31st of September. This is the S&P 500, if we had of put in $10,000, that is it ten thousand dollars in on day one.
If we have stayed invested our ten thousand dollars is now worth a whopping nine hundred and fifty-two thousand dollars. Great! If we have missed out on just five of the best days that $950,000 is now worth $590k. If we had to miss out on only 10 of the best days, our $950,000 is now only worth $425k.
That is just missing out on 10 of the best days in the market. So that means you would have lost out on 55% of your retirement. So, this is a lifetime of investing and should be invested for your lifetime and the difference in walking away with $68,000 dollars if you have missed out on 50 of the best days versus $952,000 dollars, which is a retirement pot for you.
So, that is why this is such an important lesson. Do not, do not do my mistake which I did mistake on Tesla I made some rather good returns, but I missed out on the bulk of the money.
Learn from my mistakes.
Put this to practice.
Time in the market is always better than time out of the market guys.
And that is the first lesson, I hope you enjoyed. Click the like button and subscribe if you want to be watching the rest of these series. Should be surprisingly good guys. Thank you very much for watching and have a good day.
I will leave you with a final little caveat on this, which is re-adjusting is fine, and what I mean by that is there would have been a time in history when selling your horse and buggy stocks to buy motor vehicle stocks would have been a good idea. There was a day when selling your Blockbuster stocks to buy some Netflix stocks was a good idea as well. So, do not beat yourself up too much for re-adjusting but make sure you are doing it for a good reason. That is the caveat on this everything else stay in the markets.
Thanks guys have a good day.