'I Try to just take the heat down'
The stock market may have dropped by more than 30 percent, but Ruedi Wealth Management founder Paul Ruedi's advice to clients has been consistent: Don't tinker with it.
"Money's like soap: the more you mess with it, the smaller it gets," he said.
When investing, he said "95 percent of your lifetime outcome is that decision by itself: how much over the next block of time am I going to put in stocks versus bonds. Not which stocks. Not which bonds."
After a recent episode of his "On The Money" radio show on WDWS, Ruedi spoke with The News-Gazette's Ben Zigterman about how this downturn compares with the 2009 financial crisis, what questions he's getting from clients and what he's been telling them.
Q: Have you been getting lots of calls?
A: For a while I was in March. It's fewer than anybody would ever expect when the market's suddenly down 36 percent. I noticed that some people in their 80s are more inclined to panic this time versus 2008, 2009. It makes sense; back then they were in their mid-70s. But it's fewer than I would expect. I probably had five concerned calls out of 300 families.
Q: What do you tell them if they're wanting to sell everything?
A: First of all, that it's perfectly normal to feel that way. Human nature is a failed investor. So I try to just first take the heat down. It's a method of basically saying, "Well, what is it you're afraid of?" They're afraid the market's going to go to zero and they'll be poor and won't have any money for their kids. This is where their mind is going. So you talk them through it and say, here's how much short-term, high-quality, fixed-income stuff you have that is not impacted by any of this craziness. It's going to take a long time to burn through that. That works 99 percent of the time because we have a plan that already considers worse than what's going on today. But in one case, I acquiesced and I think we reduced their equity exposure permanently at a little more favorable time because I asked them just to wait a little bit. But I insisted that they did it because they were panicked.
Q: How does this compare to the 2009 crash?
A: That was a banking system and financial system that was failing that then spread to the economy. Here we go from shutting down the economy, and now it's weakening our economy, and itÕs probably having some impact on the banking system, but nothing like that. You had the broad U.S. market went down 57 percent. This one was down about 37 percent at its worst case. The speed of it was different. This was super fast. That one was a structural, global reset. This one was treatable. It's a new experiment. Nobody knows how this ends up. That's why the markets go wild from day to day.