VINCENT RANDAZZO | from ViewRight Advisors

My guest this week is Vincent Randazzo, founder of ViewRight Advisors and creator of the Defender Program. Vincent draws on over a century of market data to help investors manage risk in volatile markets. He empowers beginners and advisors to protect portfolios while capturing growth, without timing every move.

Vincent entered the industry in 2002, right into a bear market. This shaped his views on real markets versus textbook averages. He built Defender as a rules-based system that adjusts stock exposure based on market conditions. It examines signs of strength or weakness and dials exposure up or down. In healthy markets, stay fully invested. When conditions deteriorate, reduce exposure to limit losses.

We discussed his work with advisors. Many lack a solid risk management process. Defender provides a framework to quantify adjustments, specifying when and by how much to dial back. This amplifies reach, as advisors help many clients. Vincent challenges the myth that missing the best market days ruins returns. He argues avoiding the worst days matters more. His white paper dismantles this idea, showing it's better to sidestep downturns using historical patterns. You can download and read this white paper here.

Vincent relies on market breadth—how many stocks participate in trends. This reveals health beyond index prices, especially when a few big stocks dominate, like the Magnificent Seven. Over 100 years, patterns emerge at tops: participation thins, driven by human psychology. Beginners can start simple: check how many stocks sit above key moving averages or follow the advance-decline line.

In 2025, Defender issued sell signals in February and March, reducing exposure before a big sell-off. Drawdown hit 8.5% versus 19% for the S&P500. The system later signaled buys, staying positive into mid-term. Vincent warns of potential lost decades ahead, like post-2000. Secular bull markets last about 20 years; we're 17 in. He stresses sequence risk for retirees where big drawdowns on large nest eggs can devastate.

Defender reduces emotional stress by acting like cruise control: evidence-based steps remove guesswork. Protect financial and psychological capital. Advisors using it report calmer clients and proactive positioning.

Vincent started on Wall Street, excited by the dynamic environment but humbled by drawdowns. Beginners' biggest mistake: emotional reactions during volatility, like selling low or buying high. A system counters this.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

Vincent Randazzo: If, uh, beginners learn to pay attention to what's happening under the surface and not just the index level, they can spot those changes in market health much earlier, um, than most people realize. And it's not magic, it really isn't. It's just numbers and paying attention to the right things.

Phil Muscatello: G' day and welcome back to Shares for Beginners. I'm Phil Muscatello. How can you use the tools of technical analysis without turning into a day trader? And what can market breadth teach us about the direction that the market is heading in? Joining me today to explain his view of all things market is Vincent Randazzo. Hello Vincent.

Vincent Randazzo: Hey Phil, thanks for having me.

Phil Muscatello: Vincent Randazzo is the founder of ViewRight Advisors and creator of the Defender Program, a systematic tool that helps investors manage risk in volatile markets without trying to time every market move. Vincent is passionate about empowering beginners and advisors alike to protect their portfolios while capturing growth opportunities, drawing on over a century of market data for a disciplined, beginner friendly approach to equity investing. So Vincent, for our, uh, beginner investors, can you explain in simple terms what the Defender program is and what inspired you to create it after your experiences in major market downturns? What was your first major market downturn?

Vincent Randazzo: Yeah, my first market downturn was my welcome to my career which was 2002. So that's how it all started. But I built the Defender program as a rules based way of adjusting how much of your portfolio is exposed to stocks as market conditions change. So instead of trying to predict the future, it looks at the objective signs of market strength or weakness and then turns the dial either up or down based on what we see in terms of market health. So obviously if, uh, markets are healthy, you stay fully invested. When conditions deteriorate, the system will reduce exposure to help limit the losses. And what inspired me really goes back to that first bear market. Right. It goes back to starting my career. I entered the industry in 2002 at UH, Morgan Stanley and Equity Research Sales. And that actually was the early years of, would later become known as a lost decade for stocks, of course. Right. So that shaped my understanding of how different real markets can be compared to those smooth averages that I learned about in the textbooks over the years. Of course, I've lived through subsequently and been in my career through several other bear markets. 2008 of course was probably the worst, uh, 2015 and 2022. And I saw firsthand how devastating those losses can be for everyday investors, as well as the advisors who try, uh, to help them. Right. And recovering from a big decline, it could take years. And a lot of times it pushes people to actually make emotional or harmful decisions along the way. And that's just hard to avoid as a human being. So I wanted to build something disciplined and easy to follow that helps people stay invested during the good times, but automatically steps back when the odds are against you. Right. So Defender is really designed to give investors a smoother, more manageable experience without asking them to time the markets themselves.

Phil Muscatello: So you do a lot of work with advisors as well as retail individual investors, don't you? What do you find is the need in that part of the market? Because, you know, advisors, uh, well, something that I've heard many times on the podcast, that advisors are there to hold your hand through those market downturns and just tell you to hold, whereas you've got. Your approach is slightly different. And how, uh, do advisors kind of respond to that?

Vincent Randazzo: Yeah, that's a great question. And I've worked with advisors so closely throughout my career, Always sort of in an advisory role to the advisor, actually, but from an equity standpoint, that's my specialty. And then beyond that, within equities, of course, is technical analysis, which gave me an edge in terms of the way I was able to help them and help them really with the risk management process. Because the one common trait that I found, no matter how successful the advisor, was whether they have a relatively sort of small pool of investors or whether they have a huge pool of investors and capital, they really didn't have much of a process when it comes to actually managing risk. So in an effort to help as many people as I can, I want to help the advisors who actually reach a lot of people. You know, if I could help as many advisors as I can, then they could reach a lot of people at once. Then it's easier to reach those people than if I try to reach them individually. Right.

Phil Muscatello: It kind of amplifies. Amplifies the reach of the program.

Vincent Randazzo: Uh, exactly. And that's, of course, you know, just my background. You know, I've always been a research

00:05:00

Vincent Randazzo: person. So just going into that vein a little deeper and getting a product to them, that is really what they need, uh, to cut through the noise and deliver something that is going to tell you exactly when they need to dial up and dial down and by how much. Right. So we're not only telling you when, but we're telling you by how much. And I think that's always been, uh, a big point of contention when it comes to advisors and dealing with clients and markets. Is that, yeah, it's great for you to come out as a research person and say, oh, we're getting more defensive on the market. But it's another thing interpreting that as an advisor. Okay, well, what does that mean? Does that mean I'm selling out of stocks? Does that mean I'm selling 5% of stocks? Does that mean I'm only selling my highest beta stocks? What does that mean? So quantifying that in a way that is systematized is something I thought that was really missing.

Phil Muscatello: One of the myths that you try and expose is the myth. Well, you call it a myth, although it's something that we hear a lot about, is that if you miss the best days in the market, it actually affects your returns. But for you, is there, uh, a trade off with trying to miss the worst days on the market as well?

Vincent Randazzo: Yeah, I mean, it's a really important question, I think, because the people who are propagating that myth about you can't miss those best days are the same people who want you to be invested all the time because they collect fees no matter what on that money that might actually be going down in value. They're still collecting money from you. Right? So the point is that, uh, you have to look at the source of the data, and you really have to be serious about how you examine. And I wrote a white paper about this with two other technicians who are actually also CFAs and head of RIAs on their own. Right. And we just really took that myth apart, uh, and we just said, well, you know, actually, if you miss the 20 best days and you missed the 20 worst days, it's actually far better to miss the 20 worst days than the 20 best if we're playing that game. And frankly, it's not a realistic game to play because that would just assume that we're selectively out of the market when you have those bad days, and you're selectively back in when you have those good days. Right? So it just really doesn't make any sense as far as the way the studies are constructed. But it's a huge, huge difference if you just are able to avoid those 20 bad days. So my whole point is, well, why don't you just avoid the likely downturns? Right? Why don't you just avoid what is likely to be a bear market? If I could See that train coming down the track? Because I have 100 years of data that tells me here are the characteristics of a major market top, then why wouldn't I just step to the side, not let the train run me over and then get back on the tracks when it's safe again? It just makes all the sense in the world to me.

Phil Muscatello: You draw on over a century of market data. What is that? Market data? And how do you specifically approach it?

Vincent Randazzo: Yeah, in terms of the data that I look at, again, I spent my whole entire career, so almost 25 years now, studying more than a century of stock market history. I'm a real history buff, but also have a big passion for markets. What I focus on isn't just on the price index level, it's what the market of stocks is doing beneath the surface. So in other words, how many individual stocks are actually participating in the trend, whether it be an uptrend or a downtrend. And to me that gives you a lot more of a clear picture of market health than price alone. Especially today when a handful of those big stocks can make the indexes actually look stronger than they really are. And the value of looking at that amount of data, 100 years of data, is that you start to see the same patterns that show up again and again. Market tops, they don't happen randomly. They tend to share common characteristics that are driven by human psychology. Fear, greed, overconfidence. Those things haven't changed in 100 years and they probably never will. And when you study enough history, you can see what typically happens when markets are broad internally versus what usually happens when that participation starts to thin out. And that long term perspective keeps the process anchored in evidence instead of emotions. And that helps you avoid guessing and you really just follow what the market is actually doing. You know, listen to the market really closely and it'll tell you.

Phil Muscatello: So technical analysis, what's your view of it and what would you say to people who liken it to reading the tea leaves?

Vincent Randazzo: Yeah, I would say that technical analysis certainly has a place if you are using it correctly. The reason why I say that

00:10:00

Vincent Randazzo: is that they think there's a lot of people out there, whether they're on TV or just, you know, at their desk at home, who think they know something about technical analysis. Because they know what the 200 day moving average is or because they know.

Phil Muscatello: What, you know, volume, a takeup or a teacup or.

Vincent Randazzo: Yeah, or a head shoulders or a teacup pattern. Right. Like something like this that's just scratching the surface. Right. And I Think it's really easy to get drawn into that idea that, oh, this is, this is something that is a self fulfilling prophecy and this is why it works. Well, yeah, I think there's something to that, sure. But in the type of analysis that I do, which looks at the breadth, you know, you're talking about numbers of stocks going up versus the numbers of stocks going down. These are just numbers, you know, there's no voodoo to it, there's no magic to it, there's no subjectivity to it. It literally is just math. And that's why I like to use breadth, you know, because I do think that there are a lot of practitioners out there in technical analysis who maybe are not very well trained. And that's one of the reasons why I got my chartered market Technician designation back in 2008 is so that I can be a, uh, truly educated expert in this field and not just a pretender. Right. So I think that there's a lot of that going on and they really give a bad name to the industry or, you know, the subset of the industry overall. So I would say it really just depends on who you're listening to. But educate yourself. You know, there's so many great books out there to read and you know, find, find what makes sense to you. To me, this made sense because I'm very quantitative and I'm in deep thinking economics, uh, background. So supply and demand is very much on my mind and it just sort of fit for me and I found a way to systematize it, which is, you know, something that I think goes a long way with any technical program is putting a system around it instead of just throwing up a bunch of indicators on a chart. Then you just get confused. Right. And that's the other issue too.

Phil Muscatello: Ditch the spreadsheets. Sharesight is Investopedia's top tracker for DIY investors. Invest smarter, not harder. Grab four months free on an annual premium plan at sharesite.com sharesforbeginners. So tell us about market breadth. Let's dig in a bit deeper and how you look at it and how you use it. Um, I mean, you specifically talked about like the s and P500, how much it's weighted to the Magnificent Seven or whatever it's going to be called now. Yeah, give us a little bit more of an insight into that.

Vincent Randazzo: So, yes, I mean, in terms of market breath, Market breath is again, it has to do with stock participation. Right. And to me that's very simple. It's as simple as you can get and it's Hard to fool as a result of being so simple, which is why I really like it so much. And what it tells you is if you're swimming with the tide or against the tide. Right. And I think that's just such an important concept, right, to just to know, okay, what is the basic direction of the market, how secure is that direction and how do I use that? How do I use that to my advantage? And I would liken it to what's happening beneath the surface is sort of like you can use a connection to nature. Because in nature there are rarely events that take place without warning signs, right? Whether it's a volcanic eruption or even an earthquake to some extent. I mean, there's a warning, right? Tsunami, whatever. Uh, just use the example. You're paddling down a river that eventually drops to a huge waterfall, right? That river along the way is going to give you clues long before you reach that edge. Right. The water starts moving faster, it gets rougher, the channel changes, there's a buildup. Well, the same thing happened in markets before major declines, stock participation, right. How many stocks are going up? That is, breath starts to thin out. Fewer stocks are rising, fewer stocks are making new highs. Investors gradually are crowding into the largest, or what they believe to be are the safest companies. And because of that, and because the indexes are market cap weighted, the index might actually still be going up. In fact, it is by definition. But that's being held up by a smaller and smaller group of stocks, right? And that becomes dangerous in almost every historical bull market. Those big leaders are the last peak. Right? So the headline index looks fine, it looks great, looks like a party. But underneath, the foundation has weakened. And that deterioration often starts many months before the index itself turns down. So if beginners learn to pay attention to what's happening under the surface and not just the index level, they can spot those changes in market health much earlier than most people realize. And it's not magic. It really isn't. It's just numbers and paying attention to the right things.

Phil Muscatello: How would a beginner look at market breadth? What's a way of doing that?

Vincent Randazzo: Yeah, it's such a good question, and I'm glad you sort of ask it that way. I think it's a bit intimidating, Right. And there's a Ray Dalio quote that goes something like, any fool can make it complex. It takes a genius to make it simple. Right. You don't need to be a trader or stare at charts all day to benefit from technical analysis or market breadth type of things. I'M talking about beginners can use very simple versions of it. The basic idea is just to ask, are most stocks going up or are, uh, most stocks going down? How persistent is that trend? How much intensity is behind it, in other words? And is that trend getting stronger or is that trend getting weaker? And there are plenty of straightforward indicators that show this, like how many stocks, for example, in the New York Stock Exchange are above their key moving averages. I like to use the 50 day moving average, the 200 day moving average. So you get a good sense or sort of medium term uptrend participation and long term uptrend participation or the advanced decline line, you know, is it really. It's a favorite of mine and it's really a core to a lot of what I do, which cumulatively tracks whether more stocks are rising than falling. It's just, it's an addition problem that goes on forever. Right? And you don't have to dig into the details. You just want to get a sense for the overall health of the market. And, you know, an easy analogy is swimming in the ocean. Right? You don't need to measure the speed of every wave. You just need to understand whether the tide is coming in or going out. Right. Investing, uh, is the same. Even a basic understanding of breadth helps you recognize whether you're moving with the current or against it. And the goal, I would just sort of end with this and say the goal is never perfection. Right. It's simply having the proper context so that you can make calmer, better decisions without reacting emotionally. And just, I think if you know kind of where you are, it just gives you much better outcomes.

Phil Muscatello: Okay, so how's the year, uh, 2025 looked to you? I mean, we're recording on December 8th in your time. December 9th in my time. But overall, how have you been viewing the market through 2025?

Vincent Randazzo: Yeah, uh, 2025 was an interesting year. Early in the year, of course, we had the big sell off. Now, the Defender system had two sell signals ahead of a lot of that sell off. So on February 21st, we had our first sell signal. And the way that our sell signals work is that they work in thirds and there are proofs at every point. So it's all evidence based. So it said sell a third of your equity exposure on February 21. Our next signal came on March 14 to sell another third. So that was us getting out of the market, of course, into that low. Our drawdown was only about 8.5% versus 19% for the S and P. And then of course, the other side of that, which was getting back in. And that's the other part that I think every system has to have if you're going to be defensive and a way to systematize that, you need to do the other side as well. And of course, we've been invested now for many months. The model is still looking quite positively at the prospects at least, um, near to midterm, uh, we don't really know or forecast beyond that. Again, this is all just about respecting what the market is telling us right now and extrapolating that through history. So I can't say that that's not going to change a few weeks from now or whatever. But as it stands right now, it does appear that we're in a cyclical reset, I would call it. Right. I think the cycle probably started in 2022 and this year was sort of a reset of that cycle, meaning that there's probably still some more left in the full cycle before we have what I would consider like a major or long lasting bear market.

Phil Muscatello: So walk us through the framework for adjusting stock exposure on market health signals and why it's designed to reduce emotional stress. Because that's obviously the thing when you're looking at your portfolio, that's the thing that affects returns more than anything else.

Vincent Randazzo: Yeah, I think it's a matter of protecting your financial capital and your psychological capital. I think that's just such an overlooked factor. And as human beings we really have to pay attention to that. The framework is built around one question. Is the market healthy or not? To answer that, we look at what the individual stocks are doing under the surface. That's breadth and all the gauges that we mentioned earlier. Then we compare those readings to over a century of historical data to understand where are we in that cycle and how likely is a deep or extended decline at that point is that high probability, low probability event. So it's very evidence based. Right. And then from there, the system adjusts exposure in a few clear steps. So when

00:20:00

Vincent Randazzo: the conditions are strong, you're fully invested. It's sort of like a smart buy and hold. And when things start to weaken, it almost acts like a seatbelt. Right where okay, now we're going to protect you. So you reduce exposure down to 2/3 and then down to 1/3, uh, invested. And then ultimately, if conditions justify it, a fully defensive stanch all the way down to cash if necessary. And as those signals confirm. So at every stage, you're never making a shift without solid justification. So there's not this like double thinking, psychological turmoil that's going on in your head. You're just very clear on, okay, well this is what happened and this is the result and here's the likely outcome. So for investors, you know, that's really the big benefit is the emotional side of it, like you said. And it's a bit like having cruise control on a long drive. Right. I just use another driving analogy here. You're still steering, but the system handles those constant adjustments. So you're not reacting to every bump in the road, every headline that comes out, every tariff news, whatever it is. Right. Instead of guessing or refreshing your headlines every day, you just follow the plan and it reacts for you. So that takes a lot of the stress off your plate and helps you stay confident through the noise. And, you know, confidence I don't think could be overestimated when it comes to investing. It's just so important.

Phil Muscatello: So it sounds like market breadth was what emerged for you when you were looking at this hundred years of market data. Was there anything else as well that came up as something that investors might be interested in?

Vincent Randazzo: I guess just this idea that again, how wrong the textbooks are when it comes to, oh, tell us more.

Phil Muscatello: I love hearing about textbooks being wrong.

Vincent Randazzo: Yeah, you know, just, just you start to see that, okay, well, buy and hold. Yeah, that's a great idea. But what about this like 20 year period where the market just goes sideways? Like what happens then? The textbooks don't talk about that. They just say, oh, it's 9% per year on average. Yes. The second part is really important. On average, right? It's important to say on average because the average almost never occurs. It's usually some big departure from the average. And of course, the more volatility you have, the bigger the departure. And once you get negative numbers in the equation, then it really changes things. So I would say that was the other thing that really struck out to me. Just mathematically, what's the difference between a set of years that has the same average but a different sequence? So if you have a minus 30 year and a 27, well, okay, that's almost the same thing as saying 999. But the mathematical difference is about half. Right? Ah, and imagine if you had 15 years that looked like that as far as the lost decade goes. So I would say the result of all that, my thinking is that, okay, buy and hold, okay. It's a great foundation for most investors, especially when you pair it with low cost index ETFs, because it helps you avoid one of the other big mistakes that people make. Which is trying to pick individual stocks. You know, obviously we know that very few people could do that. Well, even professionals, a, ah, very low chance of doing that. But even in buy and hold, you still face the big challenge, the large drawdowns. So a, uh, decline of, you know, 30% or 50%, that could take years to recover from. I mean, a 50% drawdown, that means you have to make 100% returns, you have to double your money just to get back to even, which is an incredible feat. And uh, on top of that, those are the moments that investors tend to panic and sell at the wrong time and abandon their plan. And that's where this adaptive process comes in. Right? So that you can avoid all those decision points and just be fully invested when you're healthy and then just walk away when it's not and really just keep it that simple. But again, that's what really struck me is just this idea that you have to be fully invested all the time. I just think that, you know, again, you look at some of the best that there ever were in the business, whether they're traders or investors, almost all of them share the same philosophy. Protecting capital and limiting losses is rule number one. You know, look at all of the greats and you'll find that a common trait.

Phil Muscatello: So the Defender program as expressed through advisors, then this is generally being implemented via ETFs and mutual funds. Is that the case, rather than individual companies?

Vincent Randazzo: Well, it's meant to be an overlay. So advisors that are using the program right now, they are discretionary advisors, they run their own portfolios. They just like to have a framework to help them with those exposures, adjusting that risk exposure when it's needed. So that's where it comes in. So that using this type of philosophy and as an overlay is great because

00:25:00

Vincent Randazzo: you could put on any portfolio that's correlated to the US equity market and frankly, toward tops and bottoms. Most markets are pretty correlated to the US equity market because it tends to be global when you do get these big drawdowns. So that's typically how it's done. And the other thing I would add, though, is that for individual investors, we are in review at the SEC for an etf. So it's not much more I can say than that, but it is something that's potentially on the horizon.

Phil Musatello: Are you confused about how to invest? LifeSherper can ease the burden of having to decide for yourself. Head to lifesherpa.com to find out more. Lifesherpa, uh, Australia's most affordable online financial advice.

Phil Muscatello: So what's the difference been when a, uh, financial advisor takes on the defender program and the relationship, how it works with their clients?

Vincent Randazzo: So what I found so far, and we just started business in January of this year, so it's been almost a year now. And what my clients tell me is that, ah, their clients are calmer. They feel like they're able to be proactive with their clients and get ahead of situations. And I think those signals early in the year were just such great examples of that and help them earn a lot of capital, political capital, emotional capital with their clients. You know, it makes a big difference when instead of your client calling you in a panic or upset, you're calling them and saying, hey, this is what I'm doing. Our systems are telling us there could be some rough sailing ahead and we're positioning you accordingly. Right. I think that that just goes so far and that's what I've heard time and time again. It's just having that system. And then for the advisor it gives them also confidence in what they're doing. I mean what they do, it's a great responsibility. And I think the more confidence you can bring to the equation as an advisor through facts, through data, the better you feel, the better you're going to perform for your clients. And uh, really just for everyone involved, it's better outcomes when you're more confident.

Phil Muscatello: And are, uh, these advisors, are they running a general account across for uh, all of their clients rather than individual portfolios? Is that how it works?

Vincent Randazzo: Well, the advisors that I work with are mostly of the variety where they're going to have sort of model portfolios that will have different sort of risk tolerances or objectives. So they may have let's say eight model portfolios and most of their clients are going to be in a, uh, combination of those eight to achieve their longer term goals as an equity allocation. So that's generally how you would do it again, just for the reason of scale. Right? Because if you're a financial advisor and you're managing 200 individual portfolios, it's just too much to really do. Right. Which is why a lot of them uh, will ultimately outsource that to mutual funds and ETFs because it really is just too much. So we're either sort of in one or two buckets. In the first bucket you're your own discretionary manager, those are the folks that I deal with. And in the second bucket you're sort of farming it out and you're paying somebody else 30 basis points or whatever. Of your assets, just manage it for you. And then you're really just the salesperson and the capital collector, if you will. Right.

Phil Muscatello: So we were just chatting off air before we started the interview that you basically started your career in Manhattan on Wall street, presumably. What was it like when you first ended up working in that area? Was it exciting, dynamic?

Vincent Randazzo: It was. I remember walking in my first couple days and it was like, I just thought to myself, like, this is really like kind of my dream job, you know, like, I really like doing this. I really like, you know, as rough as it was, waking up at 4:30 in the morning and catch the train, get to my desk by seven so that we can go to the morning research call with all the analysts, live in person in the headquarters building and hear all the new ideas and then sort of assimilate that and try to digest that those concepts and bring it down to the advisors and, and have it fit with what they do and what they like. And just such a great learning ground there. And that's of course even in my first job is where I discovered technical analysis. Because again, like I said, these textbooks, they tell you one thing and then you get to the real world and it's like, wow, wow, boom. 40%, 50% drawdown. And of course in a lot of those cases, 90% drawdowns. Right. That's some of those NASDAQ stocks. And a lot of them went away. Right. So the textbooks don't really talk too much about that. Not in a way that is realistic or applicable when it comes to your investing journey. So to have that be really my first experience out of school, it really framed my mindset. But it was definitely exciting. People talking about stocks all day long, um, these different ideas, technical analysis, fundamental analysis, quantitative analysis, just different personalities that you come

00:30:00

Vincent Randazzo: across. Uh, it was very exciting. Highly recommend it to anybody. To start out on a desk like that is a desk of 20 people. And all super smart people, all specialized in different sectors. We had our own analysts that we worked with. It was just really, uh, an environment. We're sharing information all the time and getting better. And that stayed with me. You've got to always be getting better. Continuous improvement. You build a system, well, it's going to be like sort of a leaky boat. You're always going to have to keep improving it. Getting better, getting better. Right.

Phil Muscatello: So for beginners, what are some of the mistakes or even one worst mistake m that you've seen beginners make when they start their investing journey?

Vincent Randazzo: I would say the most common mistake, whether You're a beginner or an experienced advisor, uh, is just reacting emotionally during volatility just because that's such a natural response. So people, they tend to sell after a big drop because they're scared of more losses, or they buy aggressively after a big run because they're actually afraid of missing out. So you've got the FOMO aspect of it, really, and then you've got volatility that, that'll magnify both of those fears, whether it's that absolute fear of loss or it's that fomo. And without a plan, it's those emotions that take over. So I like to think of it as, you know, you're sort of driving in a storm and if you panic and you slam on the brakes or you suddenly speed up, that's when accidents happen, right? So what you really need is a clear set of guidelines, almost like lane markings, that help you stay steady no matter what the weather looks like. So, you know, that's why it's a matter of saying, okay, when these conditions are true, then it's this. When these conditions are true, then it's that. And that keeps you from making those emotional decisions, which really tend to be very costly at the wrong time, which is when they often would occur. And that would lead me to my second. If I put a number two mistake in there, I would say this is sort of connected to the first one, which is that once investors sell out of fear, then it becomes incredibly difficult to get back in. You've psychologically anchored yourself to that pain and also to the idea that, oh, maybe you were right. And then you often end up waiting for the perfect sort of all clear signal. And that, of course, never comes, right? And then you just miss the recovery entirely. And I saw that, you know, even early in my own career that, you know, you miss big parts of moves and whatever. And that's why uh, any complete system really has to have clear rules on both sides, right? Whether it's getting out and getting back in. Which again, goes back to the idea of just taking the emotions out of both selling and buying, which I, uh, think is the really, probably even the tougher task for some people is, you know, buying back after you sold, after the market starts to turn around.

Phil Muscatello: So if someone is speaking to their financial advisor and they've heard you on this podcast, what are the kind of questions do you think they should be talking to their advisor about to make them aware of this difference in approach?

Vincent Randazzo: I think it's very simple. Just ask point blank, what is your process for managing risk. And unfortunately, I think the best answer they might get is diversification and asset allocation. And I say unfortunately because that doesn't really answer the question. A. Because those answers are not dynamic. That's a static allocation, basically just means be ready all the time for everything. And what that ends up doing is giving you really muted results. And you still have to endure the ups and downs of all those individual markets and the fact that sometimes they're sort of balancing each other out. Yeah, sometimes they are, sure. Um, so that's the first problem with it. And then the second problem I have with that answer personally is that it's just not differentiated. It's not any different. I mean, you know, you can literally go to a betterment or whatever robo advisor you want to choose, and they'll do the same exact thing. You know, if that's the answer, you know, if that is their answer, then, you know, why don't you pay a quarter of the price and just do a robo advisor? Right. I mean, so I think there, a lot of advisors are putting themselves at a disadvantage when they don't have a good answer to that question. But it's so critically important, you know, what losses do to you, especially as you get closer to retirement or you're in retirement. The math changes completely when you take big drawdowns in those time frames. So it's incredibly important to ask those questions. And I think now, especially because now we're what, 17 years into a secular bull market where you really haven't had drawdowns that lasted more than a year. Uh, that's really unusual. Um, in fact, periods like this, they often last about 20 years, and then they're usually followed by, like I said earlier, those lost decades. So I think now's a great

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Vincent Randazzo: time to start having this conversation with financial advisors and seeing what their answers are.

Phil Muscatello: So, Vincent, you've been talking about the concept of a lost decade. What does that look like, and what are the chances of that happening now? And because it's been a long time since we've had one of those lost decades.

Vincent Randazzo: Yeah, I think it's a great question. I think it's timely to consider it, honestly. Not that I think it's an imminent concern, but that, you know, you look through history, and again, I've studied over a century of data, and even going back further than that, I've studied lost decades. Going back as far as the middle of the 1800s, you had these lost decades. And actually, they weren't decades. They were actually 15 years 20 years where a stock market can go, uh, actually just sideways. What that means is that in between you've got major bull markets that sort of reach a certain point, then they sell off and you get major bear markets and then you get a major bull market again that just kind of goes back to the same level as you were years earlier and then another bear market. So it's a really frustrating, not only frustrating, just devastating time where I've read stories of post Great depression, obviously the 25 years to make a new high in the index. If you believe that, I mean, it's just phenomenal. You just consider purchasing power, things like that. The difference though is back then almost nobody owned stocks, right? So it's like it really doesn't matter that much. But think about how heavily invested people are now and think about if that were to happen now, how that would affect households.

Phil Muscatello: And if you're approaching retirement as well as we hit one of these.

Vincent Randazzo: Yeah, yeah. As you're approaching retirement. That's what they call sequence of return risk. Right. Is just this idea that the order matters. So the order which you get those negative returns matters a lot. If you've spent your entire investing career with blue skies, as many have, and even many advisors, if you think about it, in the last 20 years, there really hasn't been any advisors. The whole generation of financial advisors basically have not seen a, uh, secular bear market. They've read about them and they might actually think that it might never happen again because people just tend to think that way because things are different. And technology and whatever other excuse you want to make, well, they've made those excuses before.

Phil Muscatello: The Fed will always step in and queuing, right?

Vincent Randazzo: There's always been new technology, there's always been a new paradigm. These things have always happened, right? But they never last forever. That's the one thing that I think we always have to come back to, is that the good times don't last forever. And it's not to say that we're going to have bad times immediately, but just that again, I think like I said earlier, the average, uh, secular bull market, which is, you know, we took what we have right now, it lasts about 20 years and, you know, we're 17 years in, depending on how you want to measure it. I like to measure from the 2009 low, but if you even you measured it from the first time you broke the 2000 high, that was 2013, you're still almost 15 years in and you should be thinking about that next phase, especially, uh, if you are getting it to the point in your career or point in your age or whatever that you're getting close to retirement. And really consider what's the game plan here? Because the last thing you want to do is accumulate all this wealth and then get drawn down 50% on that big number. You know, it's different than you got a small number. I mean, I was lucky early in my career. You know, we had a lost decade, but I was just putting money into the market. It was great. Know, it's great for me. You know, I took, of course, yeah, you take, you take drawdowns on a small number because you're just starting out. But when you get later in your investing life, you've got a, you know, big nest egg accumulated and then, and then you get hit with a 40%, 50% drawdown. I mean that you just really can't, you can't come back from that. Not easily. Ah, certainly. And not in any, you know, palatable amount of time, let's say.

Phil Muscatello: So how can listeners find out more about the Defender program and your work?

Vincent Randazzo: Yes, well, you can always follow me on X. I am M. CMT Randazzo, also LinkedIn, of course. Vincent Randazzo, CMT and then ViewRight AI is the website you can learn a little bit more about what we do and how we help financial advisors at this point and a uh, little bit just about about the process and how we sort of look at markets. I, uh, did that white paper I mentioned earlier. I'd love to make that available to your listeners in the podcast notes. So if we could do that, I think that'd be super. Just as a way to learn more about this myth of missing the best days that's been perpetuated and how that fits in with sort of the, what I think is old outdated thinking in terms of the buy and hold strategy.

Phil Muscatello: Okay, that'll be in the blog post. Vincent Randazzo, thank you very much for joining me today.

Vincent Randazzo: My pleasure. Thank you so much, Phil, for having me. It's been a great conversation.

Phil Musatello: Thanks for listening to Shares Shares for Beginners. You can find more@sharesforbeginners.com if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing

00:40:00

Phil Musatello: for their future.

00:40:01

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