WEBVTT

00:00:00.000 --> 00:00:02.839
Whenever I talk to someone on Zoom about their

00:00:02.839 --> 00:00:06.280
retirement, I tend to categorise them into one

00:00:06.280 --> 00:00:11.679
of three buckets. Paralysed, pragmatic or panicked.

00:00:12.539 --> 00:00:15.779
Let me take you through a couple of typical examples.

00:00:16.800 --> 00:00:20.140
You'll see what I mean. Waiting 10 years for

00:00:20.140 --> 00:00:22.839
a 7 % market return. It's not going to change

00:00:22.839 --> 00:00:25.859
my life. I need something that can move the needle

00:00:25.859 --> 00:00:29.719
now. listen to what he's saying he's referring

00:00:29.719 --> 00:00:33.140
to a seven percent return on investments over

00:00:33.140 --> 00:00:36.640
10 years now this is something that is commonly

00:00:36.640 --> 00:00:41.880
quoted as being achievable if over the 10 years

00:00:41.880 --> 00:00:44.439
inflation stays below four percent you gained

00:00:44.439 --> 00:00:49.020
a pretty good growth in your money what this

00:00:49.020 --> 00:00:52.380
panic retiree is saying is that that weight is

00:00:52.380 --> 00:00:56.820
too long and the return is too small so what's

00:00:56.820 --> 00:00:59.320
he going to do instead he's going to find himself

00:00:59.320 --> 00:01:04.099
a tech stock that has recently performing around

00:01:04.099 --> 00:01:09.000
20 per year but the catch is past performance

00:01:09.000 --> 00:01:14.719
is not an indicator of future returns he could

00:01:14.719 --> 00:01:18.180
end up losing a large proportion of his pension

00:01:18.180 --> 00:01:22.459
pot he already thinks is too small his panic

00:01:22.459 --> 00:01:27.129
is causing him to make rash decisions He needs

00:01:27.129 --> 00:01:30.450
to take a breath. Okay, on to the next clip.

00:01:30.650 --> 00:01:33.829
My money's safe. It's in my savings account.

00:01:34.049 --> 00:01:37.250
I know exactly where it is and I can get to it

00:01:37.250 --> 00:01:39.890
when I need it. I'm going to put this guy immediately

00:01:39.890 --> 00:01:43.250
into the paralyzed bucket. He has his money in

00:01:43.250 --> 00:01:46.090
an instant access savings account. This will

00:01:46.090 --> 00:01:50.469
be paying about 2 .4%. And with interest rates

00:01:50.469 --> 00:01:55.920
above three, it means his money is eroding. his

00:01:55.920 --> 00:01:59.140
purchasing power is dropping or put more simply

00:01:59.140 --> 00:02:04.040
he's losing money every single year so why have

00:02:04.040 --> 00:02:07.359
I put him in this category well he's forced into

00:02:07.359 --> 00:02:11.240
inaction by this paralysis of fear that if he

00:02:11.240 --> 00:02:14.099
invests his pension pot that he may not be able

00:02:14.099 --> 00:02:17.280
to get his hands on it and he feels that it's

00:02:17.280 --> 00:02:21.479
distant somehow rather than in like a local building

00:02:21.479 --> 00:02:24.080
society where you can go and see the cashier

00:02:24.080 --> 00:02:28.159
and check that his money is safe okay on to the

00:02:28.159 --> 00:02:31.699
next clip i don't care about growth i just don't

00:02:31.699 --> 00:02:33.780
want to lose the money i've been saving up for

00:02:33.780 --> 00:02:37.580
all my life again this person goes into the paralyzed

00:02:37.580 --> 00:02:42.219
bucket do you agree he says he doesn't care about

00:02:42.219 --> 00:02:45.900
growth yet when it comes to pensions growth pretty

00:02:45.900 --> 00:02:48.479
much is everything that 10 pounds you put into

00:02:48.479 --> 00:02:52.650
your pension one week in 1979, it would have

00:02:52.650 --> 00:02:55.889
bought you about 40 pints of beer. Enough booze

00:02:55.889 --> 00:02:57.949
for like a whole month. Now you'd actually be

00:02:57.949 --> 00:03:01.030
embarrassed asking for change from a single pint

00:03:01.030 --> 00:03:05.270
in some part of the UK. Your pension has to earn

00:03:05.270 --> 00:03:08.129
more than inflation or you'll never be able to

00:03:08.129 --> 00:03:10.710
retire. Putting your pension money into a savings

00:03:10.710 --> 00:03:14.030
account isn't safe. It's the opposite. It'll

00:03:14.030 --> 00:03:18.599
disappear over time. Let's take a breath here

00:03:18.599 --> 00:03:21.639
then. Why do I think it's important to make a

00:03:21.639 --> 00:03:24.680
video like this? Well, I'm hoping that you're

00:03:24.680 --> 00:03:27.699
starting to think which bucket you would put

00:03:27.699 --> 00:03:30.900
yourself in. And if you don't think this is the

00:03:30.900 --> 00:03:33.659
correct bucket for you, what do you need to change

00:03:33.659 --> 00:03:37.439
to make your way into your preferred bucket?

00:03:38.240 --> 00:03:41.240
Okay, onto the next clip. Now, standard advice

00:03:41.240 --> 00:03:44.159
is fine for people who started saving at 20.

00:03:44.180 --> 00:03:46.560
It doesn't apply to someone in my position who's

00:03:46.560 --> 00:03:52.060
starting late. Okay, where's this guy going?

00:03:52.139 --> 00:03:55.699
He thinks that good practice guidance on investing

00:03:55.699 --> 00:03:58.539
for your pension doesn't apply to him because

00:03:58.539 --> 00:04:02.580
he's starting late. And this hints to me that

00:04:02.580 --> 00:04:04.919
he's going to go high risk, invest in something

00:04:04.919 --> 00:04:08.969
like Bitcoin or some kind of newly listed. farm,

00:04:08.969 --> 00:04:11.530
a company that's hoping to cure cancer. Now,

00:04:11.550 --> 00:04:14.530
if they do, he's going to make a fortune. If

00:04:14.530 --> 00:04:17.170
they don't and they run out of money, then the

00:04:17.170 --> 00:04:20.810
stock goes to zero. Now, he's definitely, for

00:04:20.810 --> 00:04:23.529
me, in the panicking bucket. He needs to stick

00:04:23.529 --> 00:04:26.910
to a sensible plan and just work hard to build

00:04:26.910 --> 00:04:30.149
his pot by cutting down on spending, not by throwing

00:04:30.149 --> 00:04:32.370
the whole lot in red and crossing his fingers.

00:04:33.269 --> 00:04:35.709
Okay, on to the next one. The stock market's

00:04:35.709 --> 00:04:39.100
just like a casino. Why would I gamble all my

00:04:39.100 --> 00:04:43.699
retirement money at my age? Ah, so the stock

00:04:43.699 --> 00:04:47.699
market is just like a casino. Sorry, but this

00:04:47.699 --> 00:04:49.860
is definitely going into the paralyzed bucket.

00:04:49.920 --> 00:04:52.660
The stock market has many options and many routes

00:04:52.660 --> 00:04:55.199
through it. For example, money market funds are

00:04:55.199 --> 00:04:58.579
low risk and lowish return. Penny stocks are

00:04:58.579 --> 00:05:01.839
super high risk with many going to the moon and

00:05:01.839 --> 00:05:05.079
others going to zero. You can pick your own way

00:05:05.079 --> 00:05:09.300
through. But discounting the whole stock market

00:05:09.300 --> 00:05:12.079
will make it difficult for you to keep your savings

00:05:12.079 --> 00:05:15.800
ahead of inflation. Okay, on to the next. When

00:05:15.800 --> 00:05:18.139
the markets dip, I see it as an opportunity,

00:05:18.139 --> 00:05:21.860
really. He says, when the markets dip, I see

00:05:21.860 --> 00:05:25.540
an opportunity. Now, this tells me a lot in a

00:05:25.540 --> 00:05:28.699
very short sentence. I'm going to put this person

00:05:28.699 --> 00:05:32.139
in the pragmatic bucket, and here's why. To have

00:05:32.139 --> 00:05:35.680
an opportunity means that some of your pot...

00:05:35.980 --> 00:05:39.480
is liquid but you're also open to buying stocks

00:05:39.480 --> 00:05:42.480
now my best guess at this stage is that this

00:05:42.480 --> 00:05:45.439
person is invested in the stock market but not

00:05:45.439 --> 00:05:49.600
all his pot is directly invested in shares he

00:05:49.600 --> 00:05:53.379
may for example have some in bonds or some in

00:05:53.379 --> 00:05:56.779
defensive stocks you can then liquidate these

00:05:56.779 --> 00:05:59.259
quite quickly and buy other stocks when they're

00:05:59.259 --> 00:06:02.439
low with a view to selling them again when they're

00:06:02.439 --> 00:06:07.480
high of this is controversial as most advisors

00:06:07.480 --> 00:06:10.759
will tell you that time in the market is a fool's

00:06:10.759 --> 00:06:13.199
errand and there's actually plenty of studies

00:06:13.199 --> 00:06:18.279
to agree with them i'd need to ask some follow

00:06:18.279 --> 00:06:21.160
-up questions here to see if this person actually

00:06:21.160 --> 00:06:24.620
did have a good grip on their own risk appetite

00:06:24.620 --> 00:06:28.860
and understood the cost of moving in and out

00:06:28.860 --> 00:06:32.439
of stocks frequently so not so clear -cut this

00:06:32.439 --> 00:06:35.470
one Tell me if you think I picked the wrong box.

00:06:36.430 --> 00:06:41.209
Okay, let's move on. Risk. The biggest risk I

00:06:41.209 --> 00:06:43.329
have is a burden to my family because I didn't

00:06:43.329 --> 00:06:47.629
take the chance when I could. Okay, so this person

00:06:47.629 --> 00:06:51.689
thinks he's been too long in the paralyzed bucket

00:06:51.689 --> 00:06:54.110
and needs to jump out and find a new bucket.

00:06:54.410 --> 00:06:58.149
It sounds to me like he's headed for the panic

00:06:58.149 --> 00:07:01.529
bucket, though. He's playing catch up and there's

00:07:01.529 --> 00:07:04.509
a chance. He's looking to roll some dice rather

00:07:04.509 --> 00:07:08.110
than keeping a steady head and following advice.

00:07:10.129 --> 00:07:14.230
Next. Market volatility happens. It's just the

00:07:14.230 --> 00:07:17.089
cost of admission for long -term growth. Wow.

00:07:18.009 --> 00:07:22.250
Market volatility is the price of admission for

00:07:22.250 --> 00:07:26.009
long -term growth. Sounds like something he's

00:07:26.009 --> 00:07:29.389
read that resonated with him and he's memorized

00:07:29.389 --> 00:07:31.899
it. Now, I don't have a problem with that. It

00:07:31.899 --> 00:07:36.000
shows he's actively investigating his options

00:07:36.000 --> 00:07:39.939
and increasing his knowledge of investing. I

00:07:39.939 --> 00:07:41.740
actually like what he said. He's basically saying,

00:07:41.959 --> 00:07:46.800
yeah, I guess there's risks, but there are rarely

00:07:46.800 --> 00:07:50.660
rewards without some level of risk. Investing's

00:07:50.660 --> 00:07:53.240
for the long game. So I'm going to put him in

00:07:53.240 --> 00:07:57.879
the pragmatic bucket. Next. I'm actually waiting

00:07:57.879 --> 00:08:00.829
for that perfect stock. And until then. I'm going

00:08:00.829 --> 00:08:04.009
to keep my money in the high street bank. Too

00:08:04.009 --> 00:08:07.490
easy this one. Straight into the paralysed bucket,

00:08:07.610 --> 00:08:10.790
and if you're not sure why, then probably best

00:08:10.790 --> 00:08:14.910
go back to the start of the video. Next. I'm

00:08:14.910 --> 00:08:19.250
keeping my pension pot in cash until the market's

00:08:19.250 --> 00:08:25.550
settled down a bit. Ditto. Move on. I'm not focused

00:08:25.550 --> 00:08:29.579
on short -term noise. I focus on... a five to

00:08:29.579 --> 00:08:36.600
10 year horizon. Okay, we have another resident

00:08:36.600 --> 00:08:41.100
of the pragmatic bucket here. In short term noise,

00:08:41.460 --> 00:08:45.100
what are the news this week? Well, stock market

00:08:45.100 --> 00:08:48.879
crash due any day to the circular trading in

00:08:48.879 --> 00:08:52.360
the AI sector. Maybe population collapse hits

00:08:52.360 --> 00:08:55.009
all world economies. Pick a date in the past

00:08:55.009 --> 00:08:57.509
and I could give you another headline that will

00:08:57.509 --> 00:09:00.309
see some people selling their stocks and moving

00:09:00.309 --> 00:09:03.750
into a wigwam in the woods. Short term noise.

00:09:04.549 --> 00:09:08.070
It's the real thing. Stay consistent. Stay sane.

00:09:10.789 --> 00:09:14.129
OK, enough of the videos. Here are three takeaways

00:09:14.129 --> 00:09:17.809
to help you into that pragmatic bucket if that's

00:09:17.809 --> 00:09:21.269
where you're looking to go. Separate your short

00:09:21.269 --> 00:09:24.549
term liquidity medium -term stability and long

00:09:24.549 --> 00:09:28.470
-term growth assets to avoid any emotional reactions

00:09:28.470 --> 00:09:32.730
to this market volatility. Prioritize being tax

00:09:32.730 --> 00:09:36.450
efficient. Use things like ISAs and SIPs for

00:09:36.450 --> 00:09:39.389
your growth buckets to protect the returns from

00:09:39.389 --> 00:09:45.409
potential tax erosion. And thirdly, build a contingency

00:09:45.409 --> 00:09:48.539
fund or a safety bucket specifically to go for

00:09:48.539 --> 00:09:51.080
those often underestimated first -year retirement

00:09:51.080 --> 00:09:54.419
expenses, ensuring that you don't need to liquidate

00:09:54.419 --> 00:09:59.159
growth assets during a market downturn. Now,

00:09:59.159 --> 00:10:01.700
I need to be clear, I don't consider myself a

00:10:01.700 --> 00:10:06.000
particularly judgmental person, but we all make

00:10:06.000 --> 00:10:09.019
judgments because we're human. Now, these initial

00:10:09.019 --> 00:10:12.139
assessments are often formed in seconds. They're

00:10:12.139 --> 00:10:15.659
deeply ingrained and they reflect our... evolutionary

00:10:15.659 --> 00:10:19.320
need to process information quickly and react

00:10:19.320 --> 00:10:24.100
to potential threats or opportunities well these

00:10:24.100 --> 00:10:27.700
immediate impressions they're powerful and they

00:10:27.700 --> 00:10:30.279
do serve as a start point rather than final verdict

00:10:30.279 --> 00:10:33.559
now recognizing this allows us to take a step

00:10:33.559 --> 00:10:37.259
back challenge those early assumptions ensure

00:10:37.259 --> 00:10:39.700
our conclusions are driven by carefully thought

00:10:39.700 --> 00:10:43.159
through thoughts rather than snap decisions and

00:10:43.159 --> 00:10:46.559
that's what i'm hoping this video will elicit

00:10:46.559 --> 00:10:49.340
really is that you'll think about what bucket

00:10:49.340 --> 00:10:53.440
you're in what bucket you want to be in what's

00:10:53.440 --> 00:10:56.299
stopping you getting there hope you find this

00:10:56.299 --> 00:10:57.980
useful see you on the next one