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By Jonathan Liss

Larry Swedroe is an optimist – something which stands out throughout our conversation about the current coronavirus-induced market panic and how investors should be navigating it. It’s possible Larry wasn’t always an optimist; he’s seen “20 different market panics” during his nearly five decades as a professional investor and his conclusion is straightforward: the economy and financial markets always recover. It’s individual investors, who by taking on more risk than they’re able to bear – either financially or emotionally – sometimes don’t fully recover from the sorts of extreme market sell-offs we’re currently experiencing.

Luckily there’s an antidote. Paraphrasing Napoleon Bonaparte, Larry quips: “Battles are won not on the battlefield but in the planning phase, because once the guns are blazing and the bombs are falling, your stomach takes over and I have yet to meet a stomach that makes good decisions.” Having a well-thought-out financial plan – and a well-thought-out plan must include the expectation of shocks like what we’ve seen over the last month and even worse – is the key to reaching your financial goals and making it through retirement without running out of money. Explains Larry, “Even someone just entering retirement now can expect to see two or three more market shocks of this magnitude in their lifetime.” A younger investor can expect to see many more than that. The old adage rings truer than ever: By failing to prepare, you are preparing to fail.

Since 1996, Larry Swedroe has been Chief Research Officer at Buckingham Strategic Wealth, a Registered Investment Advisor with $20 billion in AUM. He is also the Chief Research Officer for the BAM network of more than 1,000 advisors located across the U.S. with another $33B in AUM. Larry has spent his time, talent and energy educating investors on the benefits of evidence-based investing, authoring or co-authoring 16 books on investing, portfolio strategy and wealth management for the layman. His latest work, Your Complete Guide to a Successful & Secure Retirement, was co-authored with Kevin Grogan and published in January 2019.

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On the latest Let’s Talk ETFs, we touch on many pieces of timeless wisdom offered in that book and many of Larry’s other works during a wide-ranging conversation that covers many facets of investing during a market panic – both the current coronavirus-induced one, previous panics, and the future ones that are inevitable.

The bottom line: As bleak as things might seem, as long as investors have a well-thought-out plan and stick to it – not allowing their emotions to get the better of them – everything will be alright.

Show Notes

  • 4:00 – Larry’s unique perspective for the current panic
  • 9:00 – What’s the situation like in St. Louis (where Larry lives)?
  • 12:15 – How should investors be reacting given the current situation?
  • 15:45 – Three different types of bear markets: 2000 vs. 2008 vs. today
  • 26:00 – Weighing the costs of an extended pandemic and subsequent social distancing on the U.S. and global economy
  • 36:30 – Understanding the differences between “risk” and “uncertainty”
  • 41:00 – Figuring out the right portfolio allocation strategy
  • 54:30 – The “Larry Portfolio”: How could it have helped investors be in better shape for the current market panic?
  • 1:11:30 – Are classic valuation metrics still relevant given how modern companies operate?
  • 1:17:45 – Does the “momentum” factor work during violent market shocks? When does it work best?
  • 1:28:30 – Why does the market sometimes have extreme moves on no news?

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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