The Market Is Up but Your Portfolio Is Down. What Gives?

Motley Fool Analyst Bill Mann joins the podcast to talk about why the market is up but your portfolio may be down. And let's talk about battling our online-shopping demons.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Dec. 14, 2021.

Alison Southwick: This is Motley Fool Answers. I'm Alison Southwick, joined as always by Robert Brokamp, personal finance expert here at The Motley Fool. In this week's episode, we're going to talk about some of the sneaky ways online retailers try to get you to spend more. We'll also hear from Bill Mann, analyst at The Motley Fool about why the market is near all-time highs, but your portfolio may be taking a hit. All that and more on this week's episode of Motley Fool Answers. As I promised you last week that we'd be announcing some news this week and here it is. After seven incredible years of Motley Fool Answers, do you think we can get away with saying they've been incredible? Does that sound like we're bragging?

Robert Brokamp: I feel they've been incredible.

Alison Southwick: I feel they've been pretty incredible. Well, we are moving. Next week is going to be our last episode of Motley Fool Answers in this feed. If you're a faithful Foolish listener, you know that we have a handful of podcasts including The Daily Market Foolery, Industry Focus, and then weekly Motley Fool Money. But in January, we're combining these shows I just mentioned into one daily show that will air as a "Redesigned Motley Fool Money." Just like Motley Fool Answers appears on Tuesdays, that's when you'll be able to hear Bro and me on The Motley Fool Money podcast. We're excited, we really think you're going to like what's coming in January, and we hope you'll follow us to the Motley Fool Money feed if you're not already subscribed there. Also if you don't mind, we want to get your thoughts on the topic you enjoy hearing about. We have a four questions survey that we put in the episode description, so click that link, shouldn't take more than a minute to fill out. Next week is going to be our final episode in this podcast feed and we want you to be a part of it.

 Since we've spent so many years answering your financial questions, we are inviting you to ask us anything for our financial show. [laughs] I have no idea what those questions might be, but we're open. If you don't have a question, you are also welcome to tell us something about your listening experience. It could be a topic we helped you understand better, one financial tip you put to use in your life, a funny thing that happened on the show. Of course our email is and will continue to be [email protected], so email us your questions and I don't know, just I don't know, whatever, just email us. Next week we're going to answer some of your questions and share some memories together. Then we'll take time off for the holidays and get ready for the new show in January. Let me sum it up. Next week is the last episode of Motley Fool Answers as you know it, but we'll be back in January as part of the new daily Motley Fool Money podcast. If you're not already subscribed to Motley Fool Money, head on over so you can hear us every Tuesday. We've loved doing the show over the past seven years, hearing from you, getting to know you, hopefully helping you with your financial life and all those postcards, so many postcards. [laughs] We look forward to joining you again over on Motley Fool Money in 2022. Now that's out of the way, on with the show. 

A few years back I did a series on the little things that stores do to get you to buy more stuff. It included a sundry of assault on every one of your senses including smell. According to Adobe Digital Insights, the pandemic pushed more holiday shoppers to e-commerce than ever, and online holiday shopping grew 33 percent in 2020 compared to the previous year. This year online shopping is expected to be even bigger. How do you online retailers get you to spend more with them, and how can you be more aware of your vulnerabilities to buying stuff you really don't need? Today I'm going to talk about five ways online retailers try to get us to buy more and what you can do to spend more thoughtfully. I'm going to go a order of effectiveness for me personally? Bro, your experience may be different. I'll [laughs] give the first one a rating of one out of five over stuff stockings. 

That first one is abandoned cart emails. This is where one of a retailer sends you a follow-up email saying that "You left some things in your cart without checking out. Just think about that sad little item you left behind all alone in your abandoned cart, it's feeling so rejected and cold, so cold." Remember, stuff doesn't have feelings, don't fall for it. In fact purposefully abandon your cart is one of producer risk tips for spending less online. Before you hit buy, abandon your cart at least for 24-hours, and after a cooling off period, the impulse will have subsided and you'll realize you didn't need that badly to begin with. This next one I give two out of five overstuffed stockings. That's when retailers are stocking you online with ads everywhere you go. 

Now I know a listener emailed me to tell me this didn't happen, but I once mentioned remodeling our daughter's bathroom out loud in my living room, and my Instagram feed became a stream of ceramic tile ads. I'm just still going to keep us assuming that my phone or Alexa, and everything has the ability to listen to me and deliver ads accordingly. Now if you have an iPhone, you can use Apple's newish app tracking transparency feature. It gives you more control over which apps can track you on your iPhone and how. Unless you give an app explicit permission to track you, Apple can't use your data for targeted ads, share your location with advertisers, or any other identifiers with third parties. It probably won't surprise you that Google doesn't let you suppress ads entirely but you can ask it to stop showing you ads from specific retailers, so that's a start.

Robert Brokamp: I'll just throw in here that this one used to particularly bother me, especially when my wife and I were likely to be sharing a computer. Because I'd be shopping for her for Christmas or her birthday and then leave, and then she would come to the computer and she see ads for the things that I was looking at for her. What I now do is I visit a site to reset it, my default is nfl.com that, I pretend I'm shopping for some Tampa bay box jersey, I'm never going to buy that stuff and it certainly resets it, and I tried it this morning to see if it still works and it does. The NFL files me around everywhere, but I don't care because I'm not going to buy any of that stuff.

Alison Southwick: You can also shop using incognito mode to work at that, but I have a feeling you probably did want to buy something bucks.

Robert Brokamp: Maybe one percent of the tire works, especially after the Superbowl, but generally I'm pretty good on it.

Alison Southwick: The next tactic I give three out of five overstuffed stockings. We're getting more effective here. That's emails, so many emails. Yes, I know we are guilty of this at The Motley Fool as [laughs] much as anyone else. Every few months I do an audit and unsubscribe myself to a ton of retailer emails. Sometimes I do it manually, but I also tried using a site called unroll.me, it scans your inbox. Even after I thought I cleaned out my inbox, etc., I still had 68 email subscriptions. After they show you who's emailing you, you can tell them to unsubscribe you to everyone. They do some data sharing with Nielsen, so read the fine print before you use this or any other tool, if that makes you nervous. Another trick, of course, is to adjust your email settings to sort emails from specific retailers automatically into a folder rather than into your inbox, so you're likely to see it less.

Robert Brokamp: That's what I do. Just about any company that sends me sales stuff, especially companies that I might want to sale stuff, I just look at it every time it comes in, goes to separate folder. I check it, once, twice a week, something like that, and my junk folder too, because there's often stuff ends up in there that is important, but that's where I mostly send a lot of that sales stuff.

Alison Southwick: This next slide, I'll give a four out of five stuff's stockings. That's the virtual checkout isle. You go to Marshalls or HomeGoods or Sephora or now you know what stores I went to last week. But they make you walk this maze of random items as you wait for your turn to checkout, and online retailers also try to tempt you with add-on impulse purchases. You want to go to your cart but first the retailer asks, "Did you forget something?" and parades a bunch of items for your consideration. Now, if I'm buying groceries, the answer is yes, I absolutely 100 percent did forget something and then my cart just explodes. 

This one is pretty effective for me, if I'm just casualty shopping and not on guard. My only advice here is just to be specific and stick to your list, it takes self-discipline, but I believe in you. This last one is a five out of five stuff stockings for effectiveness because it always works on me. That is free shipping or other spending triggered discounts. For example, the site might say, "Just spend $100 and shipping is free". Or maybe if you spend a $100, you'll get 10 percent off, spend $200 and you will get to 20 percent off. What a bargain. I could not say no to this because I feel like I'm actually getting stuff for free when I'm just buying stuff that I didn't need to begin with. I have no advice for [inaudible 00:09:18] this one because this one is my kryptonite every time.

Robert Brokamp: I can only agree, I fall for it too all the time.

Alison Southwick: Yeah. That's just a few ways you're probably seeing that online retailers are trying to get you to spend more, but what can you do to spend less online in general? I realize it's a little late in the holidays to tell you this, but my first piece of advice is, to make a list and check it thrice. Write down every person you want to get a gift for, write down what you want to get them, or even just a general theme and price range and then stick to that list. That way you won't see an "I Mondays" mug online and think Caroline HR hates. Mondays too, she would love this. No, Carol does not need this mug. Number 2, put up an extra barrier to clicking buy. Retailers know that the easier they make the checkout process, the less likely you are to walk away. Now personally, I have to really want something, if I have to get off the couch and find my credit card, so make it harder for yourself. You can do this by not setting up one click purchasing such as through PayPal, or ApplePay, or any other payment processor. Also don't have Google or retailers save your credit card information and try not to memorize your credit card. A good rule of thumb, if you can make the purchase on your phone while in the bathroom, it's a little too easy. 

The goal is to make the transaction a slight bit more inconvenient because if you're not willing to get off the couch to find your credit card, you probably don't need that thing so much. My final piece of advice is to check your emotions. Are you shopping because you're bored? Depressed? Stressed? I'm generally pretty frugal person, but if things get stressful at work, I buy myself stuff that I previously told myself I didn't really need. I would've said that dress is too expensive, I already have a closet full or I'm an adult, I don't need a fuzzy onesie. But this last November when work got stressful, I said, "You know what, I'm getting that crazy dress with the Neon mushrooms." Because I think it helps me regain a sense of control in my life. When things are crazy, it gives me a little serotonin bump, I don't know. The point is my guard is down because my emotions are in a good place. Bro, do you have a time when you are vulnerable to shopping?

Robert Brokamp: Relatedly, I've never really bought much in terms of clothes online until the pandemic. I think part of it I can say, well, it's because a lot of things were shutdown and I did want to go out, but I think a lot of it was due to basically being bored and stressed. The trick I always fell for was that they make it very clear that if this doesn't fit, you could just send it back, get your money back, free shipping and all that stuff. I would say of the things that I have bought in the last few years, 80 percent, I didn't like either didn't fit right or it didn't look quite what it looked like online, or the fabric wasn't right. How much of those things did I actually return? Absolutely zero. Because I have plenty of other things to do in my life. It's too easy to rationalize like it's not exactly what I wanted, I might wear it, I end up not wearing it. The solution that I've recently tried to implement is an old productivity tip, and that is, if it only takes two minutes to do something, don't put it off, just do it right there and then. That's from David Allen and David Gardner is a big fan of that too. Now, if I ever buy clothes, I try it immediately, and decide right then and there, do I like it or not. If I don't, I do the return box, put it in the mail immediately because otherwise I'll never do it.

Alison Southwick: For the record, I wore the mushroom dress for thanksgiving, and it got lots of compliments.

Robert Brokamp: Congratulations.

Alison Southwick: Thank you. The onesie unfortunately is held up in customs. Hopefully I'll get that too. I didn't realize I ordered it from a country in the Netherlands.

Robert Brokamp: Does it need a passport or something, what's up with that?

Alison Southwick: Apparently, but whatever. It's going to be fuzzy and comfortable. We wish you happy shopping. But more importantly we hope this holiday season you'll be able to spend it making memories with people you love because that's the priceless gift you won't find on Amazon. Also, you probably can't return it. [MUSIC]

Robert Brokamp: The stock market had a bit of a hiccup at the end of November and the first few days of December but it has since pretty much recovered at least as of December 10th, which is when we're recording this show. As of the close of the market on December 9th, the S&P 500 was only 1.5 percent below its all-time high, which is pretty good given that, even with that slight decline, the index has returned 26 percent so far this year. So it sounds like good news. Well, depending on which individual stocks you own, you may not feel so good. Here to help us figure out how the market could be doing so well, while so many stocks could be doing so poorly is Bill Mann, the Senior Analyst here at The Motley Fool. Welcome back to the show, Bill.

Bill Mann: Am I supposed to say whether I'm feeling good or not? With that kind of an intro, how're you doing? I don't know.

Robert Brokamp: [laughs] I think that's the way we all feel.

Bill Mann: [laughs]

Robert Brokamp: It's a mixed bag. It's a very mixed bag.

Bill Mann: [laughs] It's a mixed bag.

Robert Brokamp: Which in a year when the market is up almost 30 percent, you wouldn't think you'd be saying it's a mixed bag.

Bill Mann: It's so funny that you put it that way because, the psychology of the market and market participants and us as investors is so interesting. Because we have a capacity to forget how things were not that long ago. Most people have done pretty well in the stock market in 2021. But they haven't done well in the stock market as compared to whatever the high point was for them, and for a lot of people that was actually in February. Particularly if you own growthier American tech stocks, with the exception of the big MANAMANA companies, it hasn't been that great of a year.

Robert Brokamp: One of the reasons I asked you to be on the show to talk about this, besides you being so smart and good looking, is that on our investor group.

Bill Mann: It's for radio.

Robert Brokamp: [laughs] I might have been ready to say that actually, but anyway. [laughs]

Bill Mann: Sorry. [laughs]

Robert Brokamp: On our investing group Slack channel that we have at the Fool, you passed along a spreadsheet that you created. It basically showed how much all the stocks in the S&P 500 were down from their 52-week highs. So as we said, the stock market's down as the index is down just 1.5 percent. But a quarter of them are down between 10 and 20 percent and almost 20 percent are down even more.

Bill Mann: This is where math is amazing to me. I really, really love the math. There are more companies in the S&P 500 that are down 30 percent or more then there are ones that have outperformed the very index that they're part of, as measured from their all-time highs. Now it's cheating a little bit because it's not like they all hit the all-time high at the same exact time. But as a function of how you feel about how you're doing, one of the biggest signposts that we have is, how was I doing when it was at its very best? So more companies, only 10 percent of the S&P 500 is down less from its 52-week high than the S&P 500 is. That's extraordinary to me.

Robert Brokamp: I think the other issue going on now is you have the S&P 500 index of big, mostly established companies. But then you have many other stocks that over the last couple of years have gotten a lot of attention, they're not in the index, and frankly they are struggling. Stocks like Roku, Zoom, Teladoc, Coinbase, Spotify, Square, Twitter, down 30, 50. Some cases 75 percent.

Bill Mann: Here's a quiz. What is the worst performing constituent company of the S&P 500?

Robert Brokamp: I should know this because I just looked at your data.

Bill Mann: [laughs]

Robert Brokamp: But it is down like 70 percent.

Bill Mann: Discovery.

Robert Brokamp: That's right, DSCA.

Bill Mann: Down 70 percent. One thing for people to remember when we talk about, and we have said this a long time for The Motley Fool. This is still music to Robert Brokamp's ears. The best place for most people to invest is the S&P 500 index fund. The reason that that is so, this is an extreme example of it, but it's still an example of it. You get access to all of these companies and it's less volatile. It's not. People will have a much harder time withstanding the volatility than they do anything else. The more you put money on individual companies, especially high growth ones, the more volatility you're going to have in your portfolio. I always talk to people about look at the stocks in your portfolio, and just think about what adventure they promise you. Some of them promise you a bungee jump over a volcano. If you own a bunch of companies that that are biotechs and space exploration, you'd better strap yourself in. It is going to be volatile and you'd better be able to put up with it. If you own a bunch of utilities, it's a lazy river with a might eye, alcoholic or non, either way. But you have to know the adventure that your portfolio promises you. You have to, in fact it's a great resolution for people. For people who celebrate New Year's, you should think about what do I own and what should I expect to happen with this portfolio? Most importantly, is that something that I think I can psychologically handle.

Robert Brokamp: I'm glad you brought up index funds because that is part of the answer and that S&P 500, the Nasdaq, the Russell 2000 degree, they're market cap weighted index funds. The biggest companies have the biggest influence, and frankly, the biggest companies have been doing pretty well.

Bill Mann: Which is the part the answer to that weird problem I was talking about.

Robert Brokamp: Of the top 10 companies in the S&P 500, only three are down more than 10 percent and none are down more than 20 percent. That's part of the magic of it too. These companies that do well become a bigger part of the index, which is why we at the Fool do recommend that. It's not such a bad idea to have some of your portfolio in an index fund.

Bill Mann: It's a really good idea to have some of your portfolio in that, particularly if you are an investor who is just starting out, or if you are an investor who worries a lot. If you worry a lot, own 500 of the biggest companies in the United States of America. I think a lot of the reasons that we pick individual stocks is that we want to feel smart, and we like the adventure. But The Motley Fool is all about helping you secure your financial future and if you'd say, what I'm going to do is buy an index fund. You know what, there's not a person in our company who would not say, that is an incredible move for you. That's what you should be doing.

Robert Brokamp: Warren Buffett has said the same thing, that the vast majority of people should be [inaudible 00:21:33].

Bill Mann: What does he know about stocks? [laughs]

Robert Brokamp: When you look at what people are saying are the reasons for this, there are a couple, a lot of these stocks were highfliers last year, if not even the years before that, and this is just basically the investment hokey-pokey. Sometimes it's in, sometimes it's out. That's just the way things work. Other people are saying, well, the Federal Reserve has indicated that it's going to start taking away the punch bowl, perhaps even faster than previously expected and that could lead to higher interest rates. Higher interest rates theoretically have a bigger impact on these high growth, lower profit companies. Do you feel like any of these explain it or in the end we don't really know?

Bill Mann: In the end we don't really know. Next question. In the end we don't really know, but we can make assumptions. If anyone says, "Do you know why this is happening?" They don't know, but there are because it is an incredibly complex environment, but it is definitely the case. The price of any company's stock is a function of how the company is doing, times how people feel about it at any given moment. That is literally the equation. I can tell you how a company is doing. I can't really tell you or predict how people are going to feel about it. A lot of what happened in 2020 to me was, in the business they call it risk off. But it really was a time in which people just said, well, I'm going to take as much of a flyer as I possibly can, absent any real consideration of how the company's doing. A lot of what's happening in 2021, I believe, has to do with the reality that a lot of the companies that people got most excited about are not magic money printing machines, they are all mildly to majorly dysfunctional organizations that some are more dysfunctional and some are less dysfunctional, some are dysfunctional in the proper direction, and that's how it's going to play out. But you just don't have companies that go up 10 times in value in a single year and have that not be a sign of something that is not related to how the company is performing. That happened a lot last year.

Robert Brokamp: Yeah. Let's pass along just a few classic evergreen standard Foolish principles just so that everyone is aware of them. I'll mention a few and you let me know if you want to add any. Of course, any money you need in the next five years should not be in the market. We as a company, have really been emphasizing the need to own at least 25 different stocks, I think that's a bare minimum. I'm totally fine with people owning more diversification is your friend, and for me also to remember that your time horizon is important. We all know that, but I think we all need to appreciate that unless we have health problems, we probably will live to our 80s, 90s, maybe longer. That means for a portion of our portfolio, probably most of it, you have a time horizon of really decades, so whatever happens in one year is probably not that important.

Bill Mann: Yeah. Even for people like you and I who are moving up in the actuarial table, we have a long time before a lot of our portfolio becomes a necessary component of our living expenses. I really do feel like it's funny to me now when you see just how short-term people's mindsets get when the market becomes scary. When the market becomes scary, in fact, the week before Thanksgiving was a whole lot of no fun on the market. The Friday of Thanksgiving was horrifying for a lot of people. Then I think it was Tuesday, the market went up and you could see people go [inaudible 00:25:37] . I felt it too, but what is that?

Robert Brokamp: In the span of less than a week.

Bill Mann: In the span of less than a week. One of the things I like to think is, "Hey, do you remember how horrible it was on January 8th 2018? People are like, "No." I'll say, exactly. I don't even know, it might've been a Saturdays for all I know. [laughs] Recency bias is a thing, and the more you are, I think probably on the greed side, but really on the fear side, the more afraid you are, the shorter your emotional timeframes become. I really think that a resolution, again, for people who celebrate New Year's, is to think about having your emotional timeframe match your actuarial one.

Robert Brokamp: Interesting you bring up 2018, that was the last year since 2008 that the S&P 500 actually lost money and it was down like five percent. We have been on an extraordinarily good run, and it's unrealistic to expect that it will continue unabated.

Bill Mann: Yeah, there's a really famous investor named Joel Greenblatt who runs a hedge fund, he is also written a great book on You Can Be a Stock Market Genius. He very openly says, "The reason why my process works is because it doesn't work one out of three years. If it worked every year, everyone would do it, but most people cannot withstand those down years." It makes some feel dormant, it makes some feel afraid. I picked actually January of 2018 at random, but you're right. The market ended up down in 2018. How much does that hurt you now? Think about it. What other things can we celebrate for New Year's, for those who celebrate.

Robert Brokamp: [laughs] I just wanted to bring up one final thing here, and that is because the last time you were on our show, you explained SPAC, special purpose acquisition companies. Then recently on Twitter, you pointed out that, well, they're not doing so hot.

Bill Mann: They're not so special. [laughs]

Robert Brokamp: In your opinion, what's happening there. I mean, did people realize that, these situations where managers say, "Hey, give me money, I'll invest it eventually, I don't know when, but when I do, I'll get to take hefty fees." Is that not working out so much, do people not like that idea? [laughs]

Bill Mann: When you put it that way. Look, Robert, first of all, I need to express my dismay. I must have done a terrible job if that's the last time I've been on and you've just now brought me back, so hopefully I'm delivering a little more value this time. Special purpose acquisition companies, easy for me to say, are just a vehicle for companies to go public, and I think that in 2020, so in 2020 and at present, there are something on the order of 400 SPACs that are out there that are looking for companies to merge with. The companies have to be of some reasonable size. I don't want to jump to the end and spoil the ending for you, but there really are not 400 really great companies waiting to be merged with on the private markets. That was basically what we talked about then, it wasn't so much that SPACs were illegal, immoral, or fattening is that you need to be really careful in any situation and where there is the with of easy money. That's what people thought was happening with SPACs. 

They thought they were getting into companies before IPO. That is some magic moment that's going to make them incredibly rich. Now, we know a lot about Wall Street, but one thing that we know about Wall Street is it doesn't tend to leave money laying around for everyone else to pick up. That's just not how Wall Street has gotten to be as big as it is, it's not wallstreet.org, here, have your money, everyone. It's wallstreet.supercom. They are good at making money for themselves. That's not wrong of them, but when you see something like SPACs where everyone thinks they're going to get rich from something you've got to watch out, and the returns from SPACs by and large have been horrible this year, and I think it's as a result, and I don't see anything better happening with them, with all of that supply out there.

Robert Brokamp: If anyone wants to see Bill's chart of the performance, and it is downright horrendous for many of these, just go to Bill's Twitter feed @TMFOtter, his tweet was on December 7th, and it's quite something. Well, this has been interesting and enlightening as always Bill.

Bill Mann: This has been a thing. [laughs]

Robert Brokamp: Thank you for joining us.

Bill Mann: It's always great talking with you. At work, we sat right by each other and I am so hopeful for the time in which we're going to be able to do that again, and I miss you guys a ton. I think Motley Fool Answers is such a special show. More Alison than you. But nonetheless, I think you guys just do great work and I'm very proud to be associated with what you're doing.

Robert Brokamp: Well, thank you, Bill, as I've mentioned on the show before, you and I started at the Fool, the very same day, 22 years ago, and you'll always be my favorite former underwear salesmen in Russia. [laughs]

Bill Mann: Yeah, they call it disaster day, now at the Fool the Great Undoing. We've known each other for a long time, we started the same day. I'm in all of what you guys do.

Robert Brokamp: Thank you Bill. Thanks for joining us.

Alison Southwick: Well, that's the show. It's edited penultimately by Rick Engdahl. Again, our email is [email protected]. Please take the survey in the show description, and also don't forget to email us your crazy questions or just your memories or whatever. We'll take whatever. All right, for Robert Brokamp, I'm Alison Southwick. stay Foolish, everybody!