Speaker Name	Transcript
Tom	Well. Hi everyone, and welcome to this month's By the Numbers. I'm Tom Wilson and I'm one of the product specialists at InvestSMART. And we're taking a quick look at the April numbers. And I'm joined by InvestSMARTs Chief Market Strategist, Evan Lucas. Hi, Evan. How are you doing?
Evan	Good. Tom, how are you? It's been a has been a busy time for you and I. There's no doubt about that.
Tom	It definitely has, especially with what's happening in markets and the recent intelligent investor growth fund raise that we finished last Friday. But I guess you're in the thick of it. You're seeing everything change daily and how it affects our portfolios as well.
Evan	Yeah. And I think right now with what's going on, this is this is when you and I have to do what we are here to do, which is to work hard for you to actually make you understand and sort of help us through the current environment. Because right now is when fear is at its maximum This is when your mind can really take over and play tricks on you, make you make mistakes, make you look at hindsight like you should have, could have, would have done something.
Evan	All of those things will happen. And why I need to sort of point to that and where it is. So I'm going to be a little bit facetious with sort of some of my stuff here today. And then start with this. Like, clearly common sense at the moment is is a little bit out the window and it you need to remember that at the moment what's going on is a very, very short period of time.
Evan	It's also when you look at it on a more broader scale in terms of how much the declines have taken or where they've gone, particularly when you look at our funds with where they are with them diversified across the range, across all manner of asset classes, it actually doesn't look as bad. You need to do step back and actually have a look at your whole rather than individual pieces because the individual pieces are what will actually make you feel worse than things genuinely are.
Evan	And the other thing to then point out very clearly is at the moment we are overdone, overheated and overreacting to if spots and maybes Yes, interest rates are rising. Yes, it is designed to slow the global economy down and try and bring inflation back to a more manageable level. But the way it's been done and the speed at which it's been done is putting things into real, real overdone areas.
Evan	I've taken these two charts from the Bank of America they've got some really beautiful things, and they show you that we are now getting into extreme bearish levels, extreme bearish levels, so much so that if you look at what's going on in particular, that chart on the left shows you that history does this all the time, like in terms of those movements up and down, up and down.
Evan	And they are really, really quick. That's also what needs to be put out there. They really quick we are talking, you know, several months in terms of what is going on here. The average correction in the US since 1900 or the average sort of more than that, even the average bear market. So the average correction average bear market tends to be about 54 days before it jumps back and actually snaps back into other reasons.
Evan	So again, it's so quick and we're talking about April here, we're already into May. We know where we're going with regards to May, it's looking fairly similar to what we saw in April as well. There is a lot of, you know, conjecture and discussion around all those kinds of things and for that reason it's why it's hard to sort of sit here and go look at the bigger picture because at the moment all of your attention is being grabbed by the fear factor and it is fear, it is genuinely playing up here.
Evan	With regards to where you see it. If you look at where we are in terms of putting it into some form of considered sideration this in my view, also this chart, I've deliberately done this to show you. This is incredibly short. There's only one portfolio that actually technically fits into this time frame. And that's our conservative fund, which has got a two plus year time frame.
Evan	This is the 20, but I've done three years here on this one just to show you what you've gone through over the last three years. OK, so this is one year above the conservative. It's talking about normal time frame. Early in my view time frame for the balance and definitely isn't the growth or the high growth, which is five plus years.
Evan	Seven plus years. So just to show you where you've been over that period for a three year time, frame, you can see that what's going on right now has taken. Yes. A little bit out. But you overall haven't lost in the scheme of things anywhere near the kinds of total returns that you've had in those three years. And that's what I want you to look at.
Evan	You've gone through COVID, you've gone through the start of the year when we had volatility around what was going on with interest rates within you, interest rates were moving higher. We've now seen them move higher. Now we're having a bit of a debate about how much higher they're going to go how much is inflation. The markets are pricing in absolutely scorched earth again, because the other thing to point out with this chart, they can and I mean by they can, if you look at the bottom of Covid to where we are today in the ASX200 it's about 50% in the S&P 500 it's about 70% in terms of the gains from top to bottom.
Evan	So there's lots of scope to actually take money off the table and that's what some have been doing. The thing is though, if you look over the last couple of weeks, it's the first time in a while we haven't actually seen a huge amount of buyers coming in, but we're not also seeing this absolute flood of sellers. There hasn't been a huge amount of institutional traders that are actually rewriting themselves or moving out.
Evan	And that's what we get to see. I know you don't see it, but that's what we get to see. And that's why you need to put it into perspective that the current decline that we've seen through April and into May, even if it was to go to the low that we saw at the start of the year, overall we performance is there.
Evan	So I wanted to go even worse and go even shorter and having a look at what's happened in the last 27 months. So this is from the 10th of February to where we are today. And this is just the ASX. 200 and total returns basis, you can see that we're still up 10% and even if you are the most unlucky investor and did buy on the 20th of February 2020 which was the top before the COVID crisis crash, you still actually up in terms of where you sit and why I show you this is that if you would have done that back in 2020 know your portfolio that you have would realistically be ready for you now because it's not
Evan	the timeframes that you should be thinking your risk factors when you do investing in equities or in any form of of risk even fixed income even in cash is that you know a year definitely doesn't make you a market two years definitely doesn't make an investment portfolio or an investment thesis. And therefore you need to have some perspective about what's going on right now.
Tom	Yeah. And you make a very good point there. And I guess that's the problem with hindsight as well. And you're thinking, I should have done this, I should have done that. And hindsight's always 20, 20, as we all know this. We'd all be rich if we all doing well in our lives if it did work. But if it doesn't make sense.
Tom	Right? Absolutely. And some of the alternatives, though, a lot of people just see the I guess the argument on the face of it, where had I put my money in the bank, you know, I'd be better off. And the reality is that not really due to inflation yeah.
Evan	And that's I'd argue that's actually not true. And the reason for it is that even with interest rates rises in Australia at the May, RBA update that transfer into term deposit rates and cash rates at the banks or what have you, that hasn't actually come to fruition yet. So it it wouldn't have mattered if you had to put money there because Tom's right.
Evan	If you actually put what we call the real return into cash where you take inflation into it, you're down quite significantly because inflation is eroding price and therefore eroding value of your of your money having your money under the mattress. A dollar of this time last year to where we are now is down about 10% because of inflation.
Evan	So it's now worth $0.90. So yes, you're seeing in terms of you know, big flashing neon lights that your portfolio might be down five, 6% over the last sort of six, eight weeks. But the charts on screen show you that since you've invested in we know most of you have invested basically over the last ten to 24 months.
Evan	The even with all of the volatility that's currently going on you're probably still up. What you're what you're watching unfortunately is the uncrystallized positions as we call them move up and down that's just part and parcel unfortunately with with what happens in markets we know that they can look ugly and they can induce a fear response. But why put that green line on there and I want to keep that green line going back to even here as well.
Evan	This is the one year average of the ASX. 200. This is the rolling one year average. Why put that? There is if we go back over the last ten years to where we are today, the average total return of the ASX 200 is 9.8% per annum. When was the last time that that average was actually given to you in a calendar year zero.
Evan	It has never done that. So it's more about understanding that you're going to have jagged edges, you're going to have ugly up and down movements. But the average return is true. It's a true fact and if you look at it, 20, 16 was the closest we got to that 9.8%. That was an 11.8% return. You've had six out of the last ten years were positives.
Evan	So four of the last were down and in saying that the down ones, the worst one in terms of where we had was 2009 sorry 20, 18, we were down about two and a half percent. It's not really a huge amount. I mean if you look at what happened in 20, 20 and you can see on the screen there in terms of where it sits, the year ended up only being down by about 1% after all said and done with everything that happened in 2020.
Evan	And that is in my view one of the most amazing events I've ever experienced in that space. So for that reason you need to look at it again from a wider picture. Remember your vision of how you look at your portfolio, need to be on a much more broader spaces as a whole and also with your timeframe in mind.
Evan	This right now is almost an instant in your time. It really is. It's a very, very small period of time and where you see it and I know that sounds maybe overly optimistic to some of you, but you understand therefore if you bring things like dollar cost averaging, if you bring in the idea of continuing to add to your portfolio compound interest, the eighth wonder of the world, as Einstein called it, will come home to roost for you.
Evan	It will happen over time. All of these charts show you that over the longer term, the charts are still rising, asset prices are still growing, companies are improving, and that's what you're investing in.
Tom	And we do speak about some of this definitely in a lot of the literature, even right on the website, in insights. I know you've covered it. And even in the boot camp, we talk about, you know, having your good plan to begin with, understanding your timeframe and also your risk profile. And often in times like this, it does make you want to question that bet going back and seeing what your original plan was and how long you're going to be in the investment for.
Tom	There should be no reason to for that to fundamentally change.
Evan	Correct. And that's that's why right now, more than anything, Tom's right. If you're feeling nervous and you're feeling fearful right now is the time to really go and actually do some more reading and some more education and some more understanding about the history and and how markets work, because it will come your overall understanding. It will calm your overall movement.
Evan	And again, as I said, the perspective is the key word here. Make sure that you're not looking at individual things you're not looking at fixed income, you're not looking at cash, you're not just looking at the ASX or international markets. You're looking at the whole because diversification is also something done by Murray Horowitz way back in the seventies, who was given a Nobel Peace Prize for it shows that it's very, very clear that if you can make sure that you're smoothing out volatility the long term returns are there, that that has been proven time and time and time again.
Evan	COVID has proven it to us, the GFC has proven it to us, and this current scenario will prove it again. This to me feels like 2013 and taper tantrum rather than anything else more dramatic than that. And that that needs to be put into perspective is the word that April and maybe may as well will be bumpy periods. You need to think about what you were doing for this, which is to grow your wealth over the long term.
Evan	You were probably considering to continue to add to your portfolio. Now is that time, now is that time as I showed you in this period right here, that this is exactly what Warren Buffett talks about when people are fearful you should be greedy. And these charts they're actually showing you that for real and that's that's where we stand and why we continue to sit here and go do not look at the month.
Evan	Do not look at the day, look at the week even. Don't even look at the one year. Look at the five year and the five years where you should be thinking and what you're going to be doing. Markets will not be where they currently are in five years time. That's that's a certainty. And history tells us that basically most of the time it will be higher than where we currently stand.
Tom	Yeah, it's a very good point. That too. I was speaking to Nathan Bell, who's the active portfolio manager of the Intelligent Investor Funds and when asked about this drop in markets, he said this is a great opportunity to get more shares at better prices, as Warren Buffett says. And also, I literally passed a person on the street just before downstairs and Collins Street, Melbourne on the on the phone.
Tom	he was saying to a friend, "Are you guys are getting excited? Some of these shares. I'm looking at you know.
Evan	I haven't been bad for years. Yeah, haven't been a better price for years. So if you can again control the fear understand these as the charts on screen show you, these are part and parcel of what happens, unfortunately on a regular basis. But they are short term events and this is when you need to be really mentally strong because the rational response is that you know that it will return, you know you're getting a better price.
Evan	And entering the market right now is actually not a bad thing with what's going on. Tom. I think that's as well and truly been time guys keep will out there. We understand that it is a difficult period. We are here on intercom at all point. I'm also here through email and through discus as well. If you're going to comment on articles, please keep reaching out because it's more about also making sure that you keep understanding where you sit and understanding that this will obviously change over time for me.
Evan	Thank you very much as always for listening to By the Numbers. Tom, over to you.
Tom	Thanks Evan. Thanks everyone. Have a good rest of your day.

By the Numbers Webinar - April Update

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