Feb. 24, 2022

What to do When the Stock Markets are Going Down

What to do When the Stock Markets are Going Down

Since the start of the year, we have seen a drop in the stock markets. The goal of investing is to grow and build wealth, but when the markets are moving down it can be hard to see the point of investing. In this episode, I share with you what to do when the markets suck. Because ultimately you deserve to feel optimistic and excited about achieving your biggest wealth goals! 

About the Host:

I am a financial professional, who specializes in helping people to achieve their financial goals.  My absolute passion is creating new possibilities in people’s lives by showing them the ropes when it comes to money. I’m here to spark healthy and positive conversations around wealth and investment and create a world where nobody is limited by their financial situation. I believe this begins with education and shifting our relationships with money. I love getting to witness people achieving their most ambitious goals and creating new possibilities for themselves and their families! 

 

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Transcript
Kalee Boisvert:

Welcome to the wealth and wellness podcast with

Kalee Boisvert:

me Kaylie Bob air, I specialize in helping people to achieve

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their financial goals. I have a love for all things numbers, and

Kalee Boisvert:

I'm passionate about financial literacy. My goal is to spark

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healthy and positive conversations around wealth and

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investment, and create a world where nobody is limited by their

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financial situation. But wealth is just one piece of the

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equation of living our best lives. So join me as we explore

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both wealth and wellness topics. From your net worth to your self

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worth, get ready to take confident action.

Kalee Boisvert:

Hello, this is Kaylee. And thank you for listening to this

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episode of the wealth and wellness podcast. For today's

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episode, I thought it would be timely to talk about what to do

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when the stock markets suck. So what do we do when they're going

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down? When they're going essentially in the opposite

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direction of what we would like to see, as an investor, you make

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investments, and you you know, put your money towards these

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investments. And the goal is really to see them go up in

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value. And unfortunately, they do not always go upward. And at

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times the markets as a whole move downwards. So since the

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start of this year, so since the start of 2022. This is exactly

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what we've been seeing the markets have continued to move

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downwards. And that can be uncomfortable, especially coming

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off a year, like we had last year when there was great

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returns. Overall, the markets performed positively. And they

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posted positive return numbers for the year. So again, it's

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especially hard to see poor performance when we just been

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used to seeing positive performance. And just as a side

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note, another word that probably is coming up a lot and you're

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hearing a lot of right now is volatility. And I just wanted to

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quickly kind of break that down. So volatility is an investment

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term for when the stock market experiences periods of

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unpredictable and sometimes sharp rises and falls, it can be

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caused by a wide range of different factors, political or

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economic factors. And we're seeing you know, that being the

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case right now for some of the short term events that are

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happening. And when you see this sudden change in the market, you

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feel, you know, as an investor, you might feel tempted to rush

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into buying or selling behavior. And also, you know, it might

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lead you to maybe acting too quickly, or lead to behaviors

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such as buying high and selling low. And we're going to go more

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into detail on that. But I just wanted to kind of as a side note

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also include the topic of you know, volatility, when we talk

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about this downward movement, as well, we're hitting a lot of

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volatility, meaning there's just kind of the sharp rises or falls

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that we're seeing as well in the market. So I want to acknowledge

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first that is not comfortable to see the markets going downwards.

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Because what that means is that the value of your portfolio is

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most likely moving downward as well. When the market as a whole

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dips, and it moves downward, there is a good chance that your

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investments have also moved. And that's why we use, you know, the

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market index or the market indices when we talk about how

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the markets are doing as it provides us gauge of overall

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market moves. And it gives us perspective as to what the

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markets as a whole are doing. So then as an investor, if we see

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that the markets are poor, like performing poorly, or having you

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know, negative days, or they're moving down, this is usually a

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good indication that your individual investments are doing

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likely something similar. So if the markets as a whole are down

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quite a bit for the day, you know, generally if you're

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invested in a diversified portfolio, and you're looking at

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indices and indices, an index sorry, that is representative

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of, you know, how you're invested. If it's the US

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markets, or global or Canada based and see that those all

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move down, then there is a good chance that if you check your

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portfolio, and your investments that they move down as well. So

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it's a good tool as a comparison or indication of the general

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direction of your investments to so if the markets are down, you

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know, for the year, let's say the markets, US markets,

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Canadian markets, global markets are all native for a year. And

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you know, maybe the numbers a bit different for each. But if

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you're invested in the markets and you're invested in those

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markets, you're likely going to see that your performance

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declines. For the year as well. So if it's negative investment

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returns or market return story, then likely your portfolio will

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do the same. So it gives you some perspective, you know, it's

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nice to see your investments go up in value. And that's what

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again, we want as investors. But if the markets as a whole are

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moving downward, then you can't expect that your portfolio is

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going to be doing something drastically different if you're

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exposed and invested in the markets. So again, not

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comfortable if you're looking at your account statement, for

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instance, and seeing the decline, let's say you're

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looking at, you know, your your month statement that comes in

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the mail or over your email. And it's less than the number than

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it was the previous month, or you're looking at the real time

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values, and it's declined in a matter of weeks. Again, not

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comfortable to see, of course, I do want to remind you, keeping

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in mind that when it comes to investing, no money is actually

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lost until a sell transaction occurs. So what you see when

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you're looking at the value of your investment account is the

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value of your investments valued on that specific date, or even

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as accurate as that specific time if you're getting real time

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updates, based on stock market, the stocks actually changed for

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the day, obviously. And so if you're getting real time

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numbers, what you're seeing on your account, is that real time

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value, so you only really have that value, though, if you're to

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sell out of your investments at that moment, and essentially

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converted all to cash. So that value that you're seeing only

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stands when the actual investment is sold, it's like if

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you were living in your house and got the market value

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assessed on your home, I mean, that's probably a little less

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accurate. It's not there's not as much of an active market. But

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if someone gives you an assessment, you know, you

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obviously haven't made any money on your home, or you know,

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cashed in on that value, until you actually go to sell the

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house and specifically what you sell it for, that gives you the

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number. So same is true with the markets, but there's an active,

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you know, auction market happening, and there is buyers

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and sellers, so you're getting that real time value of what

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your portfolio would be worth, if you were to sell it out at

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that, that day that you're seeing the number. So the value

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of your investment account. Therefore, it's always going to

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be moving a moving target almost like you're you're going to look

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at a day to day, you know, maybe even hour to hour, you probably

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shouldn't check it that often could get stressful, but it's

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going to be it's going to move based on the performance of the

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month, the markets, but money is not lost. So it's not that you

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actually lost money. If the numbers lower this month, and

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last month, you've only actually lost or locked that in, when you

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actually sell the investment and recognize then you've sold it,

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you get the cash for that amount for how many shares you sold or

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for the position you sold. So I do want to clear that up first

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that it's a moving number and it's not actually recognized as

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that specific value until you actually go to sell it. So

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depending on how you're invested the riskier portfolio, and that

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number, it can fluctuate quite a bit if you have a lower if you

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have just sort of like more of just an overall market exposure,

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it can fluctuate again, especially in terms of

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volatility. If you have much lower risk investments, maybe

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you have more GIC based type investment for portfolio meaning

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more like guaranteed investments, or ultra low risk,

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then in theory, you should see a lot less fluctuation from you

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know, day to day or month to month if you're looking at it.

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But again, of course with that, obviously, you would expect

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overall lower return numbers if you have something lower risk.

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So again, nothing is actually gained or lost until a trade is

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actually placed. The sell is made. Okay, so let's go into

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more detail though and talk about our you know, the market

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suck. Okay, so the stock markets year to date, again, where we

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stand right now they are negative, and they've had some

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pretty poor performance days with some, you know, steep

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losses to start out. 2022 So you might be asking, now what, what

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do I do and you might be taking action if you're a do it

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yourself investor or you know, even if you work with an advisor

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or you might be looking to take specific action to do something

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so you're seeing the markets go down, they just keep decreasing.

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And you're saying okay, what do I do I need to do something. And

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unfortunately that question and and that response and reaction

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might actually be doing you more harm than good. So that looking

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for something to do might actually be you know, the worst

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thing you could be doing And I completely understand human

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reaction, when things are going bad when they're not going, you

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know, when it's taken a turn for the worst, something has

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happened that is wrong, something goes not as planned,

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you know, our automatic reaction is to do something, we need to

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fix it, if there's a problem, we fix it. But this approach, when

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it comes to investing could potentially lead to even worse

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results is what I want to suggest.

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Then if you were to even take more of a passive approach, or

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you know more of a not reactive, maybe more of a wait and see

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type of approach. So the markets move swiftly, and they're

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generally always a few steps ahead of us. So unfortunately,

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it's very difficult to outsmart them. So if you're thinking that

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you want to outsmart the markets, you know, they're

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moving down. So you need to jump out of the markets well, they

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move fast. And they do remember that they're usually a few steps

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ahead of you. So when people try to take action, to avoid further

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declines, or market movements, oftentimes, the changes are made

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quite late on. And what investors actually might end up

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doing is really the worst thing that you can be doing as an

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investor, which is selling low, because we want to buy low, sell

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high, like, Am I seeing this, right? It's getting late, I'm

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taping this one is like, so we don't want to be selling low.

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That's not the ideal scenario we want to be selling when things

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have moved up, we don't want to be selling them at their lows.

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But if you are selling into negative news and volatility,

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you might end up selling at or near the bottom. And if your

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intention is to reinvest when the time is, right, that's also

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I would say an extremely challenging endeavor, timing

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exactly when the right time is to invest again. So ideally,

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finding that bottom saying, Okay, I, you know, want to get

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out of the markets, but I want to get back in when they've hit

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the bottom. That is really hard to do. And even the most

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experienced investors don't claim to be experts at doing

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this. So attempting not only to find the right time to jump out,

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but then also trying to find the right time to come back in is,

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again, that's basically twice as difficult to do because you're

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trying to time two major points or, you know, events are part

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points in the the market cycle, and trying to do both of those

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correct. And generally, I would say for the most part, what

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instead usually ends up happening is when an investor is

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looking to do something as a reaction to the markets moving

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downward, they generally sell their investments while it's

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already on the decline or moving down. And then when they look to

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reenter they do so a bit later on, when it's already started

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rising and moving upward. So this means they actually end up

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being worse off, where they've positioned themselves, because

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they've sold well, it's going down, now they're buying back in

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at a higher price while it's moving up. And they've just

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essentially made it as if they invested at a higher point and

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sold previously at that lower point. So essentially, they

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probably in that scenario would have been better off if they did

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nothing. And a really recent example of you know, when this

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major kind of market move happened, and when a lot of

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people were reacting was the the big plunge that the markets took

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in March of 2020. Due to the outbreak of the pandemic,

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internationally. So, you know, there's this international

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pandemic, there's lockdowns happening around the world, and

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the markets move down really quick as a result, and they move

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down essentially about 30%. Again, some sectors move down

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even more, but you would have seen a portfolio that was

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invested in the markets potentially move down in a

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matter of weeks, potentially, you know, 30%, or more, even in

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some people's cases. And so that was stressful in many levels,

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obviously, dealing with a pandemic, you know, people

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losing jobs, a lot of uncertainty. And it was

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difficult to see such a large decline, then, of course, to in

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the value of your investment portfolio. But what followed

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this swift move downwards was the markets, gaining back their

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losses, and even moving above their pre COVID levels in

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brackets. So I say, of course, for most sectors, so oil and gas

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was a bit slower to recover and hasn't potentially maybe

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overcloud recovered fully. And there's, you know, a few stocks

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that have not fully recovered to their pre COVID levels, or they

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were a bit slower, but for the most part, it was also pretty

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quick recovery. So they called it this sort of V shaped that

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was made in the markets meaning that it moved down quite quick,

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but it also recovered quite fast as well. So for those that maybe

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were wanting to flee during the pandemic, when it was first, you

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know, all happening again, it moved down really quick. So you

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might have sold down along the way, and then waiting to get

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back in at the right time, it moved up rather quickly too. So

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you might have gotten in a little bit later. So that's a

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real life example of how you know trying to time the markets

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and thinking that you can, you know, pick the right timing of

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when you're going to be invested. It's challenging,

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because things move quickly. And it's usually that they're

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happening a few steps ahead of you. So I do just want to make

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investors aware of that. So you know, something to consider

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maybe that taking action or that response of what should I do?

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The answer is maybe that that's not the best time to actually be

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doing anything.

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So I want to talk about two. So when it comes to money, as human

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beings, we're emotional beings. And we take that emotion with us

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to all aspects of our lives. So we definitely have that emotion

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come into, you know, the money part of our lives. And the

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thought of losing money doesn't feel good, because it can cause

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a lot of emotions to come up, you know, this money could be

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money you're saving for children's education, could be

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money, you're saving for your financial freedom. So yes, the

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this does bring up emotion, it's an emotional topic. And I would

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say emotions are unavoidable when it comes to your money. But

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that being said, I find that the best investors are those that

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are able to separate emotions from their decisions, when it

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comes to their money, and sort of try to look at it from a non

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emotional lens, kind of take a step back, and have more of a

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rational point of view, again, very hard to do in practice. And

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for people that know maybe they're not able to do that on

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their own, it's often you know, helpful to seek support in so in

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the form of a financial coach, a financial advisor, any sort of

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financial professional, having someone as your accountability

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partner, or to keep you on track with that is obviously, you

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know, a consideration to make if you are struggling with that

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separating that emotion from how you're going to act or react.

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And I'm not trying to like suggest that you get rid of your

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emotions, again, we're emotional beings, I would say it's

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impossible to try to just say, no more emotions. But I'm asking

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you just to even have an awareness of how emotions can

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play into your financial decisions. And just to be

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careful how these emotions can be influencing your financial

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decisions. You know, it's about avoiding the errors, that

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emotions can cause us. So when our decision is made in that,

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you know, very emotional based, feelings based mindset, it's

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often you know, the things we're doing is basically, you know,

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the things that are probably not the best things to be doing. And

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and that's just like one area I talked about just before this.

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So the idea of, you know, markets aren't performing good

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I'm, I need to do something I need to react, when that might

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be the the worst course of action for you to take, because

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it could lead to even, you know, worse results. If you're doing

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if you're jumping into the wrong times and selling at the wrong

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times. And it's, you actually would have been better off maybe

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to stay the course. And again, we saw with what happened during

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COVID people that stayed the course, were often better off at

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the end of the day than those that tried to jump back out,

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jump back in. So I'm asking what I am suggesting is that you

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avoid the emotional pull that might come up when it comes to

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investing. And be aware of it. So just being aware, hey, this

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is emotions coming into play is this, you know, the best course

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of action for me to take. And just know that, you know, maybe,

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maybe it's not as taking a step back, giving it some time

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looking at this initial situation, and and trying to

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maybe bring in some rational thought process process to it as

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well. So then, you might be asking, Well, what should I do?

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So again, the reaction is as human beings, it's okay, things

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are going bad. There's a problem here, I need to do something I

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need to fix it. And I'm telling you, potentially your best

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course of action is to not react to not just jump in and do

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something, especially because it might be very much influenced by

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emotions. So then you're now saying, well, then what am I

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supposed to do? What should I do?

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So in all honesty, you know, usually the best reaction when

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the markets are moving downward is just to not react at all.

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And, uh, generally, you know, don't suggest to people in times

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of extreme volatility or dips in the market, to, to use those

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times as time to make big changes, again to protect you

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from selling low. So if you're looking to make extreme changes,

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those probably aren't the best times to do it, you might want

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to just wait and give it some time and look for less volatile

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markets to do so. You know, we don't know what's going to

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happen on a day to day basis in the markets. But what we do know

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is that historically, over longer term timeframes, the

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markets have always returned positive results. Again, this is

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based on historical numbers and over longer term time periods.

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So we're talking 20 years plus 30 years plus 40 years plus. So

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even, you know, when things are moving downwards, it might be,

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you know, if you're investing right now, and seeing those

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declines in your portfolio in those values, you might be asked

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yourself, well, what's even the point of investing. And again,

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that's the point is that over long term periods, investing has

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provided investors with growth and positive results. So when we

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zoom out, when we take a step back and look at those long term

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charts of the stock market performance, it is an upward

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sloping line. So there are some dips that occur, because there

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are pullbacks markets have corrections, there are

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recessions, there are bear markets, those have happened,

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but still standing back and looking at that it is an upward

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sloping line, the line still moves upward with all those

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events that have occurred, it has still posted positive

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returns the markets. So instead of asking the question, what do

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I do? And having that again, very natural human reaction, a

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better approach, I suggest is to look at instead, what can you

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control. So like life, in general, so much of investing is

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not in our control. And unfortunately, you and I cannot

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affect the market performance. We want it to go up, we can't

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just wheel it to go up and all say, well, we you know, we all

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agree that it should go up and we want to see it move upward.

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Therefore, let it move upward. That is just unfortunately not

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something that could occur. And it is not in our control. So

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what the market does, we have to remember, really remember this,

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that what the markets going to do on a day to day basis is

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completely out of your control. So if that's the case, what I

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suggest you do then is focus on what you can control. And, you

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know, what can you control that you might be saying, well, what

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can I control if I can control the market? Well, there are

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factors you can control when it comes to building wealth, and

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investing. So one thing you can control is your savings rate.

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That's how much money you're putting away. And adding to your

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ongoing investments on maybe a monthly basis, you know, semi

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monthly, weekly, yearly, that number that you're consistently

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saving and adding on an ongoing basis or a recurring basis,

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that's something that is in your control. And if you're doing

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that, that's fabulous, especially as the markets are

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going up and down. Because you're adding to different

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points in the market, the markets might be up and you're

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adding some money that month, then the markets have pulled

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back and you're adding some more that month. And you're just

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adding again, ongoing there, it's moving up and down. And

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you're sort of taking the knowing, I guess accepting that,

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Hey, I can't control when they're going up or down or how

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much they're going up and down. But I can control saving ongoing

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and adding on an ongoing basis. So I'm taking advantage of some

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of these dips as well by doing so. Another thing you can

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control if you are sitting on some extra cash that's not

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needed in the near term, you can consider adding that to your

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investments when the markets are down. So so many people in

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hindsight have said that they wish they put more money or if

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they invested during the lows of the market in 2020. Especially

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some of the hardest hit stocks that were down much more could

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have been down more like 80% or more, you know, people looking

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at where those are trading now coming out of that and after

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Mark Three covered from that. Well, so many people are saying

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Well, I wish I would have invested or I should have put

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more money into the markets. Well, you don't have a time

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machine to go back in time and do that. But there are

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opportunities to add more money at any time the markets

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go down in value Anytime markets take a dip, that opportunity is

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always there for you. And the markets move up and down. And

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that's just part of the market cycle. So there was always going

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to be more of those opportunities. So just because

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you missed out on what happened during COVID, during 2020, when

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it was first really affecting the markets, well, you can find,

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you know, another opportunity and an A don't get too caught up

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in finding the absolute bottom. But save yourself, I'm adding

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money below the previous highs. So you're still essentially

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getting a discount from where it was previously trading. Because

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again, if you're going to wait and say, I'm going to wait till

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it's the absolute bottom, and then I'm going to invest, well,

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it's very hard to find the absolute bottom. For those that

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maybe have or can, it could have been potentially by sheer luck.

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But I would say on a consistent basis, that would be really hard

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thing to predict. So even just saying, you know, when I see the

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markets go down in value, I do have some extra cash I'm sitting

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on, I'm going to add it to my investments, that's something

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you can control. Another thing you can control is your overall

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investment allocation. So being invested in a way that is

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suitable for your risk tolerance and your timeframe. This also

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includes being diversified in your investments. So again, a

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portfolio that was primarily primarily sorry, invested in oil

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and gas, it was impacted more during March 2020, then a well

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diversified portfolio might have been where it was the more

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evenly distributed. And this is the same with a tech focused

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portfolio during the tech bubble, where those were the

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companies that were the hardest hit, and those were the

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companies that came down a lot in value. So you can and should

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ensure your portfolio is diversified across different

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types of investments across different businesses and sectors

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and geographically as well. And that's something you can control

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that is in our control. So focusing on what you can control

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when the markets are declining, is what will serve you best in

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continuing to build your wealth and make those smart financial

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decisions. So it's going to help you stay on track to achieving

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those longer term goals.

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And this leads well when I'm talking about longer term goals

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into another key piece of advice that I would suggest. And that

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is about embracing patience. So what can you do when the markets

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suck, you can embrace patience. Successful investing requires

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patience. And there's so much proof of this, if you're reading

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books about investing, if you follow some of the most

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successful investors. You know, a good example that I'm sure

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everyone's familiar with that listen to this is someone like

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Warren Buffett, and one theme that constantly comes up from

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his investing approach is about patience. I would say as a

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society, this is my rant, we have so much less like less and

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less and less patient as a whole. So we are becoming very

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much more, you know, expecting things quick and everything has

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to be fast. And even look at our social media consumption, we've

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moved to this model of you know, wanting to just watch, tick tock

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like short video formats, and that's where our attention span

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is, is we want to be, you know, served these forms of

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entertainment or, you know, we're only willing to give it a

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few seconds before we want to move on to the next piece of

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information or you know, yet pass on to the next sort of form

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of entertainment, whatever it is that you're using their social

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media forward. And again, this is just an example. And I like

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tick tock, I get stuck in the the realm of watching tick tock

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videos. But again, I think it just speaks to how short of an

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attention span we have and how quickly we want things even in

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our behavior with like online delivery. So we used to be okay,

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when we ordered something online. It might take weeks to

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get there. And that was like okay, yeah, it'll get here in a

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few weeks. Now we expect it in the same day and even more on

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that. It's like no, we expect it now, can we get it within hours?

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Can we get it sooner? And that's how everything is moving that

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quick, quick, fast, fast. So asking and expecting patience

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and investing I would say is very difficult with these

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shifting expectations. But it's so important. And when we look

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at like our investment performance and return numbers,

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again, we want to take that patient approach we want to look

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back and say okay, what are The numbers like return numbers,

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we're seeing over five years, over 10 years on your portfolio

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or in your investments over 20 years, what are those return

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numbers look like? Short term events are always going to

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happen. And for the most part, I would say most short term events

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are the ones that are really tough to predict. But what

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matters and impacts your overall wealth is not your investments

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did necessarily this week, or this month, it's how they

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performed on that longer term basis. And again, this, of

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course, the caveat to this is keeping in mind, you're

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investing appropriately for your timeframe. So if you do have a

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shorter term timeframe, let's say I'm saving for a down

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payment within the year, you know, move putting the money in

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the markets, and hoping for big gains over a short time frame,

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not an ideal investment scenario. So I'm talking about

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investing in a sense of expecting long term growth

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numbers. So in that sense, it does take patience, and probably

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more patience than you, you or I, or anyone, again, in this

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changing the sort of dynamic of instantaneous and how quickly

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we're consuming and wanting things. That is probably much

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more patience than we're comfortable or used to, to think

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of like, wow, two year return numbers, three years, five

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years, 10 years. That's crazy, like, what else are you looking

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at for 10 years. But that is important. And that's vital when

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it comes to investing. Because those longer term numbers

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provide you with a much clearer representation of your overall

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performance, and a much better indication of your progress

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towards your goals when it comes to investing. So if the goal is

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saving for your financial independence, or retirement

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number, then I don't want to see you know, what your performance

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has been for the week? Or what your results are you want to be

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looking at? Well, where's my portfolio gone over the last

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five years, 10 years? How much has it grown and compounded

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towards that goal? And, you know, if you're, if you're doing

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that you're getting a much better view of okay, am I on

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track? Am I moving towards that goal, rather than looking at the

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day to day, because the day to day fluctuations can drive you

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crazy. And if you base sort of where you want to get to, based

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on the day to day, it's going to be all over the place. So you

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have to really put your goals into perspective. And if the

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money is for your retirement savings, and you're not even

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looking at it to draw on that for 15 years plus, then is it

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really worth your time really stressing out and looking at the

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day to day fluctuations that are happening right now? I would say

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probably not. So I'm not saying you know, ignore your

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investments all together and take a peek at them in 10 years

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time. But I am encouraging you to look at the bigger picture

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and see, am I moving towards that goal? When I look at that

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bigger picture, from a, you know, five year perspective from

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a 10 year from a 15 year. That's what really matters is that

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getting me closer to my goal. Again, the day to day, it's

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really hard to gauge from the day to day with all the

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volatility and fluctuations. So we do have to take a step back

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and look at the averages over longer terms to get a clearer

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picture on performance and progress toward the goal. So I

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hope this episode has helped to relieve some of the stress or

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anxiety over crappy markets. And you know, when the markets suck,

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I don't like it either. So I'm on I'm on your side. But I you

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know, I urge you to not let market performance get you down.

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Because I do believe that when it comes to money and wealth

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building, you deserve to feel optimistic and positive about

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your money and your wealth goals and know that you're going in

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the right direction. And I know sometimes that's hard to do

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again, with that short term day to day what's going on. But if

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anything, I hope this episode has helped kind of ease some of

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those concerns and the stress and anxiety and look at that

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bigger picture. So thank you so much for listening in. I hope

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you enjoyed today's episode, and I will catch you on next week's

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episode. Thank you so much bye for now

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I hope you found value in this episode. And because I'm such a

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proponent of taking confident action, I want to pose a

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question to you the listener. What is one action that you feel

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inspired to take after listening to today's episode if You enjoy

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listening please subscribe and share with your friends and

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family thank you so much and I will catch you next time