Month: April 2025

Welcome back to Marc’s Book Club! Each month, I read a new book of my interest and share my thoughts and insights – whether it is personal, financial, or both. This month’s read is The Psychology of Money by Morgan Housel, which dives into how our behaviors and beliefs shape our financial lives and decision-making. Money plays a large and unique role in all our lives. Yet, according to a 2022 Junior Achievement Survey, 80% of teens say they wish they were taught more about money management in school. While learning the basics of saving, credit, and investing is essential, even more important is developing a healthy mindset around money. Money is simply a tool to do the things we love doing, with the people we love the most. In The Psychology of Money, Housel dives into different behaviors that lead us to make flawed decisions with their money, and ways to build healthier habits and mindsets.

 

One of the most powerful lessons of the book  is that we all have different goals when investing, saving, or spending – which means everyone has a different journey with their money. Yet, we often assume that our ‘next-door neighbor’ has the exact same goals as we do when investing. This is when problems arise. For instance, the ‘next-door neighbor’ might brag about a 10x return they made on a speculative investment in a short period of time. This can easily trigger a sense of FOMO for us. What is often overlooked is that we already have a rock solid plan in place to reach our financial goals, and investing in such a speculative investment for a quick return would lead to unneeded risk and potential financial ruin. Housel eloquently says: 

“few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are. The main thing I can recommend is going out of your way to identify what game you’re playing. It’s surprising how few of us do. We call everyone investing money “investors” like they’re basketball players, all playing the same game with the same rules. When you realize how wrong that notion is you see how vital it is to simply identify what game you’re playing.”

 

Housel’s idea of ‘the game’ is crucial. By constantly trying to keep up with our ‘next-door neighbor,’ we lose sense of what is most important to us, and stop playing the financial  ‘game’ we want to win at. Having an investment plan rooted towards achieving our own goals is most important.

 

Another key takeaway is the difference between gambling and investing. Housel recalls, “A friend of mine makes an annual pilgrimage to Las Vegas. One year he asked a dealer: What games do you play, and what casinos do you play in? The dealer, stone-cold serious, replied: “The only way to win in a Las Vegas casino is to exit as soon as you enter.” That’s gambling: there might be a few times where you win big, but more often than not you leave even or down. Investing, on the other hand, is like being the casino, or ‘the house.’ Some days are down, most days are up, and over time, the house grows stronger and always wins. Just like the casino, balancing short-term fluctuations with the long-term success of the markets is the optimal way to build wealth.

 

Lastly, Housel writes about the importance of viewing market volatility as a fee, not as a fine. Investing is inherently risky, and the only way to receive heightened investment returns over long periods of time is to accept some level of risk. When markets have volatility, like what we have seen so far in 2025, many investors retreat to cash because they do not have the tools and proper mindset to deal with short-term pain. Housel writes, “Market returns are never free and never will be. They demand you pay a price, like any other product. You’re not forced to pay this fee, just like you’re not forced to go to Disneyland…The volatility/uncertainty fee—the price of returns—is the cost of admission to get returns greater than low-fee parks like cash and bonds.” The key to investing is keeping a long-term mindset, and embracing uncertainty and volatility as the price to achieve higher investment returns.

 

The Psychology of Money is a must-read for anyone interested in understanding the why behind our  financial choices. Recognizing where we are already excelling, as well as acknowledging where we can improve, is key to moving forward in a positive way. Most importantly, the book encourages you to figure out what game you’re playing—both with your money and in your life—and to take deliberate steps towards winning the game.

By Carl Szasz, President | Financial Advisor

 

When markets tumble and headlines scream uncertainty, anxiety can quickly set in. However, these moments of volatility are not just tests of nerve—they’re opportunities for savvy investors. At Verde Capital Management, we guide clients through these turbulent periods by encouraging three strategic actions:

1. Deploying Excess Cash During Market Downturns

If you have cash that you don’t anticipate needing for at least 12 to 36 months, a market decline presents a potential buying opportunity. Historical data from First Trust shows that after significant market drops—specifically declines of 5% or more in a single day—the market has, on average, risen by over 30% in the subsequent year.¹ Investing during these downturns positions you to benefit significantly as markets recover.

2. Traditional IRA to Roth IRA Conversions

Market drops create ideal moments to convert traditional IRAs to Roth IRAs. Consider a traditional IRA valued at $100,000 before a downturn, now valued at $90,000. By converting now, you’re taxed only on the reduced value. When markets rebound and the account recovers to its original value—or grows even more—this growth occurs tax-free in your Roth IRA.

3. Embrace a “Low Bad News” Diet

Behavioral finance tells us that most investors are naturally loss-averse—we feel the pain of losses far more intensely than we appreciate equivalent gains. During market declines, loss aversion can be particularly pronounced, leading to anxiety-driven decisions.

One common mistake is focusing on your portfolio’s decline in terms of absolute dollars rather than percentages. Imagine you have a $1 million portfolio that falls by 10%. Saying, “I lost $100,000!” can trigger panic, especially when mentally equated to your annual income. Yet, saying, “My portfolio dropped by 10%, and markets can recover quickly,” offers perspective and reduces unnecessary stress.

A Personal Story: Perspective Matters

When I started my advisory career at American Express—and later franchised out—my wife Melissa would ask how my day went. On days when markets were volatile, I’d casually say, “Bad day—I lost $2 million,” or conversely, “Good day—I made $3 million.” After a series of negative days, Melissa became visibly worried. “Are we going bankrupt? Is your business okay?” she asked anxiously.

I was taken aback until realizing I’d been unintentionally sensationalizing daily market swings. I explained to her, “Honey, $2 million represents just 1% of the total assets I manage. The market regularly moves by that much daily.” She replied, understandably frustrated, “Why didn’t you say that sooner? You’ve had me worried sick!”

This experience taught me a crucial lesson about framing. Losses expressed dramatically in dollar terms can induce panic. By focusing on percentages, we maintain perspective and emotional clarity.

How Verde Capital Management Supports You

While it’s vital for you to maintain perspective, it’s equally crucial for your advisors to proactively manage your portfolio:

• Preparing Before the Storm: At Verde, reacting to market volatility as it’s happening is akin to “trying to catch a falling knife.” A safer strategy is waiting until the knife hits the ground before picking it up. Anticipating downturns months in advance allows strategic rebalancing, currency hedging, and diversification into sectors less impacted by specific economic stressors—like tariffs.
• Watching Institutional Movements: One reliable sign the “knife” has hit the ground is institutional buying, particularly noticeable during the final 30 minutes of trading. Institutions typically execute their trades late in the trading day. If markets improve towards the close, it signals confidence from larger investors that valuations have stabilized. At Verde, we carefully monitor these patterns to optimize our timing.

Bottom Line

Market volatility will always be part of investing. By strategically deploying excess cash, considering Roth conversions at opportune moments, and managing your emotional response through perspective and a “low bad news” diet, you can significantly enhance your investment outcomes. At Verde, we’re committed to proactive portfolio management and thoughtful communication, helping you navigate market turbulence with confidence and clarity.

As always, reach out to your advisor if you have questions or concerns—we’re here to guide you every step of the way.

 

¹ Source: Bloomberg. Performance is price return only (no dividends). As of 9/30/2022. Past performance is no guarantee of future results. For illustrative purposes only and not indicative of any actual investment. Returns are average annualized returns, except those for periods of less than one year, which are cumulative. Index returns do not reflect any fees, expenses, or sales charges. Stocks are not guaranteed and have been more volatile than the other asset classes. These returns were the result of certain market factors and events which may not be repeated in the future. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. Investors cannot invest directly in an index.