welcome to another episode of Rich Dad stock cast the podcast for people that are serious about improving their financial education I'm your host Del Denny and today we're tackling a topic that can make or break your financial future why most people panic and lose money in the stock market now if you've ever felt nervous during a market crash if you've ever sold an investment out of fear or if you've worried about what's coming next right this episode is for you before we dive in we want to give you something special to take control of your financial future go to stock cast bonus. com right now to get free tools and resources that will help you invest smarter even in uncertain markets that's stock cast bonus. com grab your free bonus now now let's get into it joining me today is richdad expert Andy Tanner Andy is one of the best Educators I know when it comes to Stock Investing and financial intelligence Andy welcome back to the show thanks Dell excited to hop in this is uh you've always choose great topics and so we appreciate the listeners that make comments because that's often where we'll draw those from so you've chosen a good one today that's exactly listeners we we love your feedback so drop us a comment if there's something that you want to hear us talk about feel free to drop it in the comments wherever you're listening to this podcast now Andy let's start with this why do most people panic and lose money when the market dips is it just fear or is there something deeper going on well it's it's certainly emotion um one of my favorite people to to study on this is is the greatest investor of all time Warren Buffett no one's close um he's he's just done tremendous things and he had a mentor excuse me named Benjamin Graham who taught him at Columbia University who was a teacher there in fact that's why Buffett chose Colombia he uh he wanted to take a class from Benjamin Graham he had learned about him before school and and uh said I want to enroll in Colombia and go there and he has a book uh called the intelligent investor and you'd think that it'd be about Gathering Intel and and uh you know the growth and there is a little value formula in there that he he gives for an example but that's really the book on temperament um you know there's a saying that when emotions go up your intelligence goes down and Buffett will always say you know if you've got a if you've got a high IQ sell 20 IQ points because you won't need them to invest uh sell 20 IQ points and just get your temperament right and and I think that's one of the biggest things as I've studied him that his Brilliance is unquestioned he is genius for sure but often his Brilliance overshadows that the fact that his temperament has been has been the the a big part of that onew punch you know education but temperament is how you behave temperament is how you talk to other people temperament is about your communication um you know they say oh this person has a temper well that comes from the word temperament and so having a a great temperament is something I've had to work on because I'm a pretty emotional guy and so I've had to work on that you know being more emotionally resilient over the years and uh you know fight that part of my personality that's effective you know so I can be effective so yeah um people people if they if they sell a stock because they're looking at a price uh they're going to lose money and they shouldn't invest if you're going to sell things because the price is moving or buy things because the price is moving um you're almost totally gonna like it's it's like Bitcoin if you're gonna buy a Bitcoin understand the Bitcoin but don't buy it because the price is moving or sell it because the price is moving understand the underlying asset so the way Buffett does it is he says look I'm going to buy a business and I'm going to buy that business or sell that business based on how the business is doing without looking at the stock price because prices are detached uh from value often both ways sometimes are what we call overvalued sometimes what call undervalued and if you if you sell when a price drops as your sole reason for selling of course you're going to lose money you're selling at a low price the irony is and Co was a great example of this I was more aggressive in my buying during Co than any other time in my investing life because it was on sale so the the irony isn't just that people are losing money by panicking it's that they're missing the sale uh where these these stocks are so undervalue or or undervalued they're so undervalued um you can buy things for pennies on the dollar for what they should have been and so it's it's quite the opposite that once stocks go down you should be buying to me that makes a lot of sense right if you're a consumer and you can't wait for Black Friday you got money in your wallet you just can't wait to get rid of it because the prices are going down well flip put on your investing hat okay you got money in your pocket when do you want to buy the assets well when they go down so that Panic is is welcome uh I I hope everyone panics like crazy because the the price is plummet well the value of the company remains um and if the value of the company remains when the price is plummet you're a buyer not a seller so temperament is a huge thing well I I want to dig into temperament because it is a huge thing and you know fear and greed it plays into that right you know for me I think we both have a similar background of of basketball I love basketball my best games were when I played angry you know get that chip on my shoulder put me in coach I'm ready to go but that doesn't work so well when it comes to the stock market and keeping a level head how how do you have a good tippit when it comes to investing how how do you get away from the fear and the greed well Buffett's competitive I mean competitiveness and anger you know there's no question you know when Kobe gets that underbite you know underbite Kobe gets you know yeah that's when you know the Black Mamba is coming out yeah and the and you know Jordan gets that tongue wagon out you know you know in trouble but if you if you're R our test or excuse me met a world piece and you go into the stands and have a malice of the palace you lost control of that temperament if you're John Starks and you headbutt regie Miller you get ejected well that temperament went too far didn't it so if you start you know if you're Keem elijuan you start throwing punches at Bull bully pulse they now you know you've got in his head so that anger has there's two types of anger there's anger where you're just angry and you're victim and the whole world's against you and you know oh no one's fair to me and I'm angry at the world or there's anger as fuel and and that's what's really helped me is when my anger has fueled me and become an energy source to you know go win but but you you have to have a lane I think of of temperament that that is healthy so you can be too happy too you could be a little bit too Jolly you know me I get I get te guide way too easy so I've had to knock that stuff off you know someone some I'm watching the Olympics and some dude from some Scandinavian company wins the curling competition to Winter Olympics and he's down on the podium with an anth and I've never heard and I'm Niagara Falls like well great day you know so so you know temperament is a big deal so how do you how do you deal with that well a lot of it is is you know make a plan and then and then do your plan up down or sideways if you make a plan when you're levelheaded it's it's like my sons um I would sit them down and I would forecast moments in their life where where their emotions might get the best of them and so while we're calm we'd forecast that for example when they were probably I don't know 11 12 13 years old I'd say you know someday you guys are going to be driving around in a car with your buddies when you get your license here in a few years and someone's going to pull out a bottle and you're going to have a decision to make so let's talk about what you want to do in that moment because there'll be peer pressure and there'll be other things or you know maybe you'll be with a young lady and and you know you're holding hands and it's kind of fun and next thing you know you you might want to do a little more and hold hands well how do you what's at stake what do you want to do how do you want to Bridle your passions as as they often say right nothing wrong with being passionate but the the bridal of the horse keeps the horse moving the way it needs to move so it can win right so you can work with with with the horse well you can work with your emotions when you Bridle them so if you can have a plan and say look if the market has a 50% retracement what's my plan and we have a class I'll give it a plug it's not a beginner's class so most most people listening can't take it because you have to have prerequisites to take it but we have a class called armor which is Advanced risk management and opportunity Readiness and all the armor class is is it's it's how to deal have a plan for catastrophe is how am I going to make money if the market has a big you know 30% drop or 50% drop you know those those one every 10e types of things are you prepared for those my my brother is a homicide detective and he he spent a lot of years as a as a you know officer and I just remember vividly watching on the television one time is they had a officer shooting there was a sniper out trying to kill these officers so he's roing around the neighborhood shooting a police officers and I there's there I see my brother on TV with his AR-15 patrolling by foot and I just thought man you know how do you deal with that he says we train for it we have a plan we train for it we keep our cool because we've trained for it and you'll often hear those guys you know when they're in a shootout well the training just kicked in that's temperament control the training just kicked in well as an investor you know have I practiced in my paper trade account am I have I really gone through a scenario a stress test to where I know how I'm going to react before so I don't lose my mind cell and lose money because if there's a huge selloff in the market you see your net worth shrinking that's where cash flows key I always use this analogy I hope people don't mind its repetitiveness but it's a six-year-old can understand that a goose that lays a golden egg is worth more than a golden egg and if you have a goose and the price of the goose Falls because people are panicking they want cash so they're selling their geese they're they're panicking they're selling their geese but if I look at my goose and I say he's healthy uh he's laying golden eggs um yeah the price is is falling on my balance sheet I mean if I went to sell him today I could you know I wouldn't get much for him and people like well maybe I better sell him now before it goes further but wait wait wait wait wait he's laying achs he's laying achs so when when my Real Estate Zillow stuff comes in on the houses the you know the single family home stuff we have you know I get these things from Zillow saying oh it went down 5,000 went up 6,000 went down 8,000 I don't think I just lost $5,000 on the house house or whatever it is right went down 1% it's not a big deal uh but if the rent is coming in and the cash flows coming in that's how I live my life that's how we go to the grocery store right is through the the passive income same with the syndications right um so all that stuff if you have cash flow I think it really helps I think it's harder with things like gold and Bitcoin because if you see your Bitcoin going from 100 Grand to 80 let's say well it's not producing cash so do you sell or not makes a little tougher but with real estate and stocks if I see a stock go down and I have written covered calls on it and I have a dividend coming in it's cash flowing it's a Golden Goose that's producing cash and I don't need to worry about stock prices you know whether they manipulate or not I don't care uh if I get my cash flow coming in great uh because all markets are manipulated they all are um by one way or other by the fed or what Happ what have you so cash flow really helps with temperament to be able to say well yeah the price of my Golden Goose is down today but it's producing eggs and as long as producing eggs you know who cares what the price is um it's the golden eggs it produces that allows for someone to get out of the rat race or stay there go I love we can't have a stock cast without a Golden Goose analogy can't have it yeah no rants today no rants today I I must be I want to have a better temperament there you go well let's this let's go to break we just exposed the biggest reasons why uh most people panic and lose money in the market but now let's talk Solutions when we come back Andy's going to break down how smart investors win in any Market whether the economy is booming whether it's crashing or it's stuck in uncertainty and don't forget if you want to start investing smarter today go to stock cast bonus.
com grab your free resources right now we've put together some powerful tools to help you make better Financial moves that's stock cast bonus. com check it out stick around we'll be right back so far it's been great I needed a source where I could really enrich my education through stocks I didn't really have an Avenue for it and it's helped me a lot the Simplicity has really gotten me on the track to where I enjoy the learning as well as it's really solidifying in my mind and like they're not just trying to sell you something they really care about the people that are in the course and they really do care about you and your personal goals and what you want to do is to help you and your family and whatever your goals are in life through that so it's really been great welcome back to richdad stock cast I'm your host Del Denny and today we're breaking down why most people panic and lose money in the market but now it's time for the good part how you can win in any market now before we jump in one more reminder go to stock cbon us. com for free investing resources that will help you take control of your fin fincial future now let's talk about the the smart investors mindset thinking longterm how do how do wealthy investors stay calm and strategic when the market drops well we alluded to it a little bit in the in the previous segment on having a plan and having training the reason I developed that Armor class was just that right now we're we're in an expanding bubble um if you look at for example the Schiller PE index and how high that is relative to earnings you know we're paying so much for equities that that for the you know in in relation the cash flow they produce we're just paying a lot for them um I look at little things like uh delinquencies on autol loans people are struggling to make their payments now so you're starting to see you know little little signs little things that can put cracks and things so you get prepared and you have a plan for this think of it this way um Robert kosaki wrote a book called the unfair advantage and I really love the title of that book I the power of financial education you know unfair advantage and he was very kind and and had uh some of his team write a little in the book and what I what I wrote was in a nutshell uh amateur investors seek to make money with capital gain they're trying to buy something low and sell it high where more professional investors will look at cash flow and they'll invest for cash flow Warren Buffett in his 2020 letter I think it was said there is no metric you know of the of the numbers operational earnings you know money coming in is the most important number in a business are you earning money with what you're doing that that's it's the most important number it's not the value of the business going up and down it's what service are you are you offering so cash flow the other thing I said in that book is there's also a difference between how they manage risk um amateurs tend to get in 401ks where they diversify which doesn't help you against systemic it actually increases systemic risk um and professionals tend to use contracts and and hedge in in insurance is what it would be insurance so think about your temperament this way if you're insured if your house was on fire right now you're going to have a your blood pressure is going to rise no question I mean oh my gosh I'm going to call the fire department I'm G to say hey my house is on fire this is going to be a hassle here to have to rebuild my house but if you're insured it's less temperament problem than if you're not insured in other words if you're watching your house burn you might lose some personal artifacts but if you're insured it's less Panic than if you're not and if you're not insured and you're watching that thing burned down that's a whole new level of Terror right whole new level so what's more likely to happen in the next 10 years for the for your house to burn down or for your 401k to burn down you know hey houses burned down you know California boy what a tragedy I mean it's horrible right uh and yet most of us will never have that happen to us most most of us will never experience what they did um you know but we still have insurance but almost nobody has Insurance on a 401K and almost everybody will feel that heat uh when if a market crashes everyone's 401K think about that for a minute how could you have a nationwide fire that'd be really hard to pull off to have every F every house on fire but to have every 401K on fire you just need to drop in the market so the systemic risk to 40 inks and and those Diversified Investments is massive if you know how to Ure and know how to hedge well that really can help with your temperament because you're going to panic less knowing that well yeah this asset's going down but the insurance is going up right they work together so having a good plan understanding how to protect Investments having a a a you know Financial education is is a huge thing you know people don't drown because they can't swim maybe so much as they drown because they Panic I've heard that I imagine not knowing how to swim would contribute too so if you have an education you'll Panic less and you'll actually it'll flip you'll you'll look to buy and you'll have greed Warren Buffett said it very succinctly he said uh quote I will tell you to become rich close the doors be greedy when people are fearful and be fearful when people are greedy have the opposite temperament of of the market and uh and you'll be fine so those are some things you can do is look around when everyone is panicking are you the guy that can keep his head or her head uh you know can you buy when other people are selling um that takes practice and planning and study and uh you know having a having a good plan to trade so that's what I would say the biggest thing you can do is study and have a plan and if you have a plan when an emergency strikes you can keep your head but in almost every first aid class the number one rule is when you come upon emergency is keep your cool Don't Panic uh have training and let your training um do what do what it tells you to do now now speaking of training there there's so much information out there how do you get trained how do you create a system systems are are so important when it comes to investing whether whether it's investing whether it's basketball whether whatever building and business systems are key if I were new in the stock market what's a system I could adopt what's a simple strategy that I can do so I am my temperament is even kill well on my team one of the gifts Robert gave me is you know he on what I do on my team is we study so for example right now me Noah Corey we have a book that we're going through right now it's not one I'm going to share because it's about that thick and it's it's arduous but we we're always trying to learn more so part of that is who you hang out with and and if you have a team you want to study the things that you feel will will help you as your team and so that's that's one of the things I I really have to credit Robert for is you know what did the author say you know how to really get with a group of people and and try to learn how to learn and so study is a huge part of it because it's who you hang out with and so you know get great mentors get great teachers hang out with people that are it's not hard for me to hang out with people smarter than I am case in point right I I'm always the dumbest guy in the room it seems but that's a good thing uh because then I can learn some stuff so who you hang out with uh is really really important and I I I want to hang out with people that have even temperaments I want to have people that that Keep Their Heads I want to hang out with people that are you know rational and that that that you know really think things through and uh that helps me with my poor temperament and helps me raise my game uh because my temperament is you know always something I'm working on for sure so I don't sell and panic uh when I should be buying yeah you know I wonder is Warren Buffett just a zen-like person like through all these years is he pretty Zen I don't know I don't know I mean I mean it's it's you on the one hand you say well what problems does he have you he's got a zillion dollars he's sitting on but you know he's had years where he's lost 48% of birar ha's value you know he had one year where half the money was gone and you know that's kind of he's got a lot of people that trust him so uh I don't know I don't know Warren personally I've studied him from afar I'll be sad when he passes uh because he's getting up there we're not going to have those gems forever you know so I try to hang on every word he says while while he's still with us because he's in his 90s and uh you know his business partner made it to 99 and so hopefully Buffett uh can hit that Sentry Mark and and keep teaching us I sure hope so I mean he has enough money to invest in his health so hopefully he keeps going he doesn't he drinks Coke and goes to McDonald's that's I I know right May well maybe that is is the secet instead of uh these cold plunges we just start drinking Cherry Coke like Warren Buffett I don't know now I we're getting close to time here but I want to ask one more question you know a lot of people you know they feel paralyzed when it comes to investing how can they start building confidence and start taking action I I think that's the key how can people start taking action well I'll plug our our site we designed uh stock cast bonus.
com as a place to get started it's for a place to say okay I've I I enjoy listening to podcast but it didn't put an asset in my pocket today right I enjoy listening to you know reading a book but I didn't put an asset in my pocket and so to give people some actionable stuff start with learning how your financial statement Works um you know when I teach there's a fancy name for this it's called fundamental analysis and uh the best way to learn it is to buy the cash flow game I'm always plugging that for sure um you know play the cash flow game and you can learn that that's a great simulation but that that will simulate putting Assets in your pocket so that's a great way to to start but really start with your own financial statement when we teach fundamental analysis you know you can do you can analyze the financial statement of a country uh of a church of a school of a nonprofit of a city um of a company uh and also your own but the most important financial statement you'll ever study is yours no matter how the world Burns around you your financial statement is is the one you will live on so if a person wants to start that's I think that's the blessing of Rich Dad Poor Dad in that book is it made people aware of what a financial statement and a cash flow pattern in that statement looks like to say h there's patterns of watching where the cash flows and where it comes from and how it works and I can see what a poor person financial statement looks like and what a rich person Financial stat St looks like I think that's part of the Brilliance of that book of many things we could we could site but start by learning financial statements and once you know what one is um drop by stock cast bonus. com and learn a little more about those six numbers and keep moving forward so that's that's it learn financial statements as beginning and and then uh start learn how to manipul manipulate yours position yourself to do better than you did yesterday there we go I love it well Andy we're out of time that's a wrap for today's episode of Rich Dad stock cast you know fear and panic causes most people to lose money in the market but if you understand how investing really works you can win in any Market condition and a huge thank you to Andy Tanner for breaking this all down for us if you take nothing else from this episode just remember this the key to Winning is to stay educated stay invested stay in control of your emotions now before you go make sure you go to stock cast bonus.
