Scott Pape’s tips on how to deal with a sharemarket meltdown

If you are freaking out about the market meltdown, Barefoot Investor feels your pain. Here’s how to deal with it.

It’s been almost a year since I decided to stop drinking.

It all started when we headed off in the RV on our ‘lap around the map’ adventure.

I decided – on a whim – that I didn’t really want to drink around the kids (and, besides, hangovers with four kids in a seven-metre-long van would have driven me off the road).

So I nervously announced my major life decision to Liz.

She just frowned and said:

“But you don’t even drink that much anyway!”

(She’s my rock.)

Truth be told, I always thought I’d resume drinking when I got home from our RV trip. After all, I live in the country, and when we have a boys’ night out we organise a bus to drive us both to and from the boozer. (Think about that: there’s not even the slightest thought that we’d have a light beer and drive ourselves home. Oh no, it’s on like Donkey Kong.)

So my mates think I’m weird, but I think I’m ahead of the trend.

‘Non-alcoholic drinks’ is the fastest growing drinks category in Australia. Sales of alcohol-free sauce at Dan Murphy’s have increased by more than 100% in the past two years. Perhaps that’s why when Dan Murphy’s opened their first ever bar they decided to not serve any grog. That’s right, their bar in Melbourne is called ZERO%; it serves 30 zero-alcohol drinks on tap and offers more than 200 others to take home.

Yes, being off the booze is just so hot right now. The movement even has a name – ‘Sober Curious’ – which makes me want to get rolling drunk. For me it’s right up there with Gwyneth Paltrow’s $75 vagina candle (which actually sold out, so maybe it really is a thing).

There are two factors driving this long-term trend:

First, young people are drinking more responsibly than any generation before them. According to the Centre for Alcohol Policy Research, the number of 18- to 24-year-olds who don’t drink has doubled in the past 20 years.

Scott Pape gave up alcohol a year ago.

Second, and most importantly, non-alcoholic drinks are getting a lot better.

So my favourite beer … isn’t actually a beer. It’s called ‘Hop Valley H20’ by the Heads of Noosa Brewing Co. It’s a mix of soda water and hops, and it’s the absolute bomb. It has zero sugar, zero calories and zero alcohol. Even my old man, a seasoned drinker, likes it.

And what about wine?

Well, last month I went to see Crowded House.

When I headed to the bar, I looked up and realised that the first five drinks were all non-alcoholic. So I ordered a glass of non-alcoholic red wine and took a sip … and it blew my Barefoot socks off.

“That is the BEST non-alcoholic red wine I’ve ever tasted!” I yelled at the barman.

“That’s because it’s red wine … sorry, I must have misheard you”, he said sheepishly.

Back to the Ribena for me!

Tread Your Own Path!

I’M FREAKING OUT

Hi Scott,

I’m sitting here watching my portfolio plummet. The stock market is down 4.75%, and my portfolio is down 5%. IN ONE DAY. I have only been investing for a couple of years and I am freaking out. What should I do?

Louise

Hi Louise

I feel your pain.

Now, as Warren Buffett would say … actually bugger that! All the Mr B quotes in the world can’t prepare you for your first drop in the market.

Here’s how I deal with it.

First, I don’t invest any money in the share market that I think I’ll need in the next five years.

Yes, the interest rate I’m getting sucks, but not as much as seeing the money I need evaporate in a sell off, right when I need to spend it. If you put short-term money in stocks or (god help you) crypto, you really need some time in the contemplation corner.

Second, I have come to think of my share portfolio like my farm. It’s there to provide me with a golden harvest of dividends over my lifetime. Some years there will be bumper crops, other times there will be droughts. That’s just how the world works. Yet over the long term, owning the farm makes sense (especially when I don’t have to drive a tractor to get the income!).

A trader works on the floor of the New York Stock Exchange. Picture Michael Nagle/Bloomberg

Finally, how do I react to savage sell offs like we had last Monday?

Well, I don’t. I feel the same way about shares falling as I do reading a newspaper headline that says ‘farm prices are down 5%’. Sure, it’s a bummer, but what can I do about it?

Call up a real estate agent and sell?

They’d be very happy to claim the commission, but would I be any better off?

Of course not!

I’m now invested in broad based, low cost index funds, and my golden rule is this: ‘never sell the farm’.

And so if I never plan on selling, what do I care about the price?

SCAMMERS GOT THE LOT

Hi Scott,

My daughter recently clicked on a text message from scammers saying they were from ANZ. She entered her login details and gave the scammers full access to her account. I’m worried about what will happen next. I’ve googled it a bit and have seen that scammers can change your postal address and steal your identity. Is there anything my husband and I can do to help her work through this and protect her from what they might do with her info?

Kellie

According to the ABS, 2.1 million Aussies experienced one or more types of personal fraud in 2021.

Hi Kellie,

Grab your phone. Grab your daughter. Dial 1800 595 160.

That’s the number for IDCARE, Australia’s national identity and cyber support service. Their hotline is manned by specialist identity and cybersecurity counsellors who will give your daughter free advice.

Tell your daughter not to beat herself up too much. These things happen a lot. In fact, 2.1 million Aussies experienced one or more types of personal fraud in 2021, according to the Australian Bureau of Statistics (ABS). Yet, shockingly, only half of those who experienced a scam said they reported it to an authority.

Don’t let them get away with it!

I HAVE TEARS IN MY EYES

Hi Scott,

Six years ago we were in deep trouble. I hadn’t worked for years as I’d been looking after our young daughter, who had cancer. We’d been living on one income and had car loans, credit cards, store credit, unpaid phone bills, erratic repayment history, and a mortgage. Having enough money to cover everything seemed like a mysterious process that was only for rich people. Well, the most incredible thing happened to us yesterday. Six years after buying your book, we have paid off our home loan and have no debt at all. It’s the most secure, calm feeling, and I am so damn proud of us.

We now have Mojo, holiday savings, shares and enough money to cover our daily expenses while still having dinners out. We’ve taught our children some massive lessons about money, and now the eldest will have her house paid off in five years.

Scott, it’s been life changing and I write this with tears in my eyes. I’m so grateful for your book. We are ordinary people and you spoke to us in a way we could understand. The daughter who had cancer is now healthy and will soon be going for her L’s – she is busting to reach an age where she can work too! ‘Thank you’ isn’t enough but I wanted you to know it’s the best freedom I’ve ever felt and I wouldn’t have known how to get here if you hadn’t shown us the way.

Linda

Hi Linda,

Wow. Just wow. You did great!

It’s kind of amazing to me that almost seven years after I wrote my book there are still people like you coming back and telling me about their journey.

For anyone else out there who’s still working through the Barefoot Steps, I hope Linda’s story gives you some motivation. Your story is next.

P.S I’ll be back in a few weeks. For these school holidays the kids and I are planting 1000 trees on the farm – chestnuts, and Californian redwoods – that will outlive all of us!

DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.

The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need

(HarperCollins) RRP $29.99

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