Why Investors Make Bad Decisions During Market Volatility with Mark Kenney, CFP®, CTS™ – Ep 105

Market volatility can cause even the most disciplined investors to second-guess their decisions. When headlines dominate the news cycle and emotions begin to take over, many retirees risk making short-term financial moves that can negatively impact their long-term retirement goals. Without a comprehensive plan in place, fear and uncertainty can lead investors away from the strategies designed to protect their lifestyle and future financial security.

In this episode, Keith Ellis Jr. is once again joined by one of SHP Financial’s Certified Financial Planner, Mark Kenney, to discuss the role behavioral finance plays in retirement planning and why emotions often drive poor financial decisions during uncertain markets. Together, they break down the psychological tendencies that can lead investors to react impulsively, explain why long-term planning matters more than short-term market movements, and share real-world examples of how proper financial planning can help retirees stay confident during periods of volatility.

They also discuss the importance of having different investment “buckets” for safety, income, and growth, how tax planning impacts retirement success, and why open conversations around money and legacy planning can help families better prepare future generations. Mark and Keith explain how having a holistic retirement roadmap can help retirees navigate uncertainty, make smarter financial decisions, and maintain confidence in both their plan and their future.

In this podcast interview, you’ll learn:

• Why emotional investing decisions can negatively impact long-term retirement success.
• How behavioral finance influences the way investors react during market volatility.
• Why having separate buckets for safety, income, and growth can reduce financial stress.
• How staying invested during downturns can improve long-term portfolio performance.
• Why tax planning should be part of a comprehensive retirement strategy.
• How conversations around legacy planning can help families prepare future generations.
• Why confidence and clarity are critical components of a successful retirement plan.

Inspiring Quotes

• “We are all humans. We are driven by emotion, and there’s nothing more emotional than when you see your money go up and down.” – Mark Kenney

• “People who manage their own money underperform the market by 2% to 3% because of emotional biases, because they make the wrong move at the wrong time.” – Mark Kenney

• “Don’t focus on the final figure. You focus on what it’s going to take to get you there.” – Mark Kenney

• “Time is probably way more important than money. And that’s what retirement is. You’re getting time to do whatever you want.” – Mark Kenney

Interview Resources

• Zillow
• The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach
• Galway Advertiser

[INTERVIEW]

Keith Ellis Jr.: Welcome, everybody, to another edition of the Retirement Roadmap. Brought to you by SHP Financial. I’m your host, Keith Ellis, joined by Mark Kenney today. And today we’ve got a pretty interesting topic considering everything going on in the world, and it’s behavioral finance and how people act in these times of ups and downs in the market. I mean, it’s easy to sit tight when the market’s going up. Everyone’s happy when everything’s green, right? But when things start to turn red, shifts in the world, shifts in the economy. This is when people need help, or they need coaching through these situations. So, I was hoping you could talk a lot about that today. We’re going to have some fun talking about behavioral finance, though.

Mark Kenney: Yeah, I think it’s right, Keith. I think this is where we really add our value as financial advisors, because we are all humans. We are driven by emotion, and there’s nothing more emotional than when you see your money go up and down. And so, today I want to talk about some examples where we see that and where we kind of got to look at the whole picture and bring a client, try to bring the emotion out of them so they don’t make irrational decisions. And there’s a statistic, Keith, that I always mention with investors, that people who manage their own money underperform the market by 2% to 3% because of emotional biases, because they make the wrong move at the wrong time.

Keith Ellis Jr.: And I could see that happening quite a bit. When the market starts to become volatile, people get engulfed in the news and the news in your face. When really, whenever you want it, whether your phone, television, social media, and it’s on you all the time, it creates a reaction, maybe without even knowing inside of you that makes you or could push you to these irrational decisions. So, it’s so important to take yourself away from maybe some of the things circled around the news and have that long-term plan.

Mark Kenney: Yeah, that’s correct. I mean, we saw that, and we’ve seen that a few times in the last, like, five years, right? So, you go back to COVID, right, when the market moved very quickly, very lower, and we were answering phone calls left or right, and clients saying, “I want to sell,” right? Everybody wants to sell at the bottom.

Keith Ellis Jr.: Yeah. Exact opposite.

Mark Kenney: It’s the exact opposite. Then we saw that in the beginning of last quarter, right? The market was down, what, 10% in the course of a few months. And these are all driven by short-term factors like COVID, and like we’re going through now, too, with the conflict in Iran. But you got to bring the client back to their original financial plan. And one of the big things is cognitive biases, right? So, I’m going to use that as the first example in behavioral finance, and how it’s funny how you can take any stock in the world, right? And I picked for this example Tesla because Elon Musk is a polarizing figure, and I think there are some people who love him and the products that he brings and the companies he brings. And there are some people who maybe aren’t so in favor of him.

But I looked at this example and you can take a stock at any point in time, and you can have one person say, “Listen, this stock is going to go higher.” And another person can take the same date and say, “Listen, this stock is going to go lower.” And they can both be right. And what it is, is it’s timing, right? So, one person might say, after a month, the stock is down 10%. I told you it was going to go down, and then three months later, the stock is originally up 30%, and that person says, “Yes, I told you it was going to go up.” And so, we want to bring it back to the original plan so that you understand that stocks will move in the short term. I think Warren Buffett has the best analogy for this.

He says, “In the short terms, it’s a voting machine.” People vote. In the long run, stocks are a weighing machine that the real good companies that have earnings will last the test of time, versus in the short term that it’s voting. We want to make sure that clients don’t overreact in these situations.

Keith Ellis Jr.: Yeah. You just brought back COVID, and some of the planning that we were actually doing over that period of time, one of the things was reaching out and being proactive with our clients and saying, “Listen, remember, you have a plan in place, right?” We’ve planned for these downturns. We have money allocated. I always say when I’m meeting with the families that I work with is we want to put purpose around your money, right? We want you to understand what each allocation does, when we potentially would need it or not, and what the purpose of it is within your plan.

So, we believe, or I believe, that you should have money for safety. This is your short-term money. Your boiler breaks, your roof leaks. You need a new car. This is money you can go get immediately. We know you’re not going to make a lot of money on it, but it’s safe, it’s liquid, it’s there, right?

Mark Kenney: Yep.

Keith Ellis Jr.: Then you have money that’s dedicated to help supplement your income, your social security. Maybe you have a pension, maybe you have rental income, but you need a little bit more to maintain the lifestyle that you want in your retirement. There, we want to make sure that also is relatively safe, that it’s there, that you can get that money almost like on a month-to-month, week-to-week, biweekly basis, however a client wants it. So, now you have your safe money. You have your money dedicated for income. Really, what we’re trying to do there is just protect one thing, your lifestyle, because people want to maintain their lifestyle in retirement.

And then everything else can go into that growth bucket for that longer-term strategy that, yeah, we know the market’s going to go up, and we know the market’s going to go down, but we know over the long run the market’s probably going to go up. And like if you go to COVID and people exited on that down, there’s no way you would’ve known like within a day it’s going to bounce right back up. You know what I mean? It’s amazing. There’s a study. If you miss the top 10 days of the market over the last, what, 30 years, you miss 4%, 5%, 6% growth, which is astronomical.

Mark Kenney: I see those statistics all the time. I just saw one recently that said, I think it was over 35 or 40 years, and it was like if you miss the top three days, your portfolio dropped by like 50% of where it could have been, and then 10 days. And so, yes, that’s what we do is by creating those first and second buckets that protect against volatility. You can have that third bucket that’s more equity-driven. And guess what? Because you have enough in the first two buckets for 10 years, you can ride out these waves and not enter this herd mentality. Oh, everybody’s selling because Microsoft is down. Because then, as you said, the people who did sell in COVID, right, how do you get back in?

The markets back up a month later, and guess what? You’re thinking to yourself, “Oh, it’s short-term. It’s going to go back.” All of a sudden, three years later, it’s up 100%. And you’re like, “Oh, I never got back in,” right? And so, that’s why it’s so hard to time the market. You’ve got to stay long because of those statistics, and say, if you miss the best three days, and that’s our job, is to make sure that you don’t miss those three days and bring it back to the original plan.

Keith Ellis Jr.: Yeah. I mean, it’s that saying, right? It’s not timing the market. It’s time in the market.

Mark Kenney: Yeah, that’s correct.

Keith Ellis Jr.: Do you see what I’m saying? Because it’s true. You know what I mean? If you look, just look at your 401(k)s, right? You’ve been putting money into your 401(k) for 5, 7, 10, 20, 30, 40 years. You didn’t go in and out of the market. It’s just compound grows. It went through COVID, it went through 2018, the back end of the year market crash. It went through like a 2013 quantity. It’s been through all these different periods of time. It’s gone through 2008, right? It’s gone through all these different periods of time, and here we are 10, 15 years later, through all these ups and downs, and it continues to march forward because you just stay consistent and you can stay long in the market.

Mark Kenney: Yeah, and we always hear, Keith, how many clients like think, “Oh, but this time is different. This time is different,” right? And that’s a saying in the financial world that everyone thinks that this time is different. But let me get to another behavioral finance topic, mental shortcuts. I thought this was really interesting, in an example, and I want to share with our listeners, is how we look at debt versus how we look at savings is completely different. And here’s the example I’m going to give is think of a million-dollar home, right? You’re going to go buy a million-dollar home, and let’s use the other example is a million-dollar 401(k).

Now, what happens with the million-dollar home is you go to Zillow, you see a million-dollar home, and you think, “Well, I’m going to buy that house for a million dollars.” Right? Well, we know that at 6% interest rate, that actual home, I developed the math for our listeners is that you’re actually going to pay for that million-dollar home $2,154,000, right? So, it’s funny how we look at a million-dollar home, we’ll say, “We’ll buy that,” and it ends up costing us over double. $2.2 million, and that’s at a decent interest rate. But how we look at our retirement goals is the opposite. We look at the final figure, and everybody wants, “I want to get to that million dollars,” right?

Keith Ellis Jr.: Right. Yes. So, many times I’ve heard that.

Mark Kenney: But if you break it down, that million-dollar IRA really costs you $10,586 a year. This is the examples I’m giving is if you invested for 30 years and I gave a 7% rate of return on your 401(k). So, imagine if we said to Mr. Client, “Listen, if you wanted to save a million dollars, you don’t focus on the final figure. You focus on what it’s going to take to get you there.” And it breaks down to, like I said, $882 a month or $29 a day is what you would need to save, right?

Keith Ellis Jr.: Stop going to Starbucks.

Mark Kenney: Yes, yes.

Keith Ellis Jr.: Redirect that money.

Mark Kenney: And that’s why the set it and forget it method and how the book, Automatic Millionaire, is so simple in its terms, but it’s so effective. Just set it and forget it. So, we always look at debt. They break it down into the lowest common denominator, right? When you go buy a car, the sales guy will always break it down into your monthly price, because they don’t want you to think of what you’re actually paying. And we do the opposite. When we’re saving, we look at the final figure instead of what we need to save. And that’s one of the mental shortcuts that I think is really interesting when you look at it. I can remember it was funny living in Ireland. I remember seeing an ad on the Galway Advertiser for €59 for a car.

And I said, “Wow, that’s crazy.” And what they did was they broke the monthly car price weekly. We always see what a monthly payment would be. They broke it down into weekly because again, if you break it down into its lowest…

Keith Ellis Jr.: That was a really good sales pitch.

Mark Kenney: Right? And so, we should do the same when we’re trying to save something, break it down into what we need to save, not the final figure.

Keith Ellis Jr.: Well, it’s interesting because folks will come in here and say, “Listen, this is kind of the lifestyle I want in retirement. Here’s where I’m currently at. What do I need to do to get to that point?” And if you don’t have a plan and you’re not trying to base your situation off a plan and you’re more or less just winging it, one, how do you know what you need to do to get there? Two, how do you know how long it’s going to take you to get there? Because maybe you want to get there faster. Okay. Well, now we need to save a little bit more. Or maybe you don’t care. You want to work a little bit longer. Okay. Maybe we need to save a little bit less.

Mark Kenney: When we’re sitting with clients, and we go over what we call the possibilities, meaning, Keith, that is the most beautiful thing when you can show them these are the little things you can do now to either buy a couple of years early of retirement, right? Or here’s this one. You’ve probably done this before, where you sit down with someone, they say, “I can’t retire,” you go over their expenses, their lifestyle, and you show them they actually could have retired two years ago.

Keith Ellis Jr.: Two years ago. That’s the best feeling.

Mark Kenney: Right? And they walk away in the best compliment we get paid is like, “Wow. I didn’t think I could retire.” You’re giving them back time. And not to get philosophical, but time is probably way more important than money. And that’s what retirement is. You’re getting time to do whatever you want. And so, I always love coming away from those meetings telling people, yeah, you could retire. You can retire tomorrow.

Keith Ellis Jr.: You don’t have to go to work anymore. It’s a want, not a need.

Mark Kenney: That’s correct.

Keith Ellis Jr.: You know what I mean? So, those are the best conversations that I have is you’re right, “Hey, Mr. And Mrs. Jones, you could have retired a year ago, two years ago.” A lot of them still continue to work out of choice, but it’s nice to know where you feel empowered going to work, knowing again that you don’t need to go to work.

Mark Kenney: It’s a different mentality when you’re walking on a Monday, right?

Keith Ellis Jr.: Exactly. Exactly. Your boss says something, you’re like, “Yeah, I’m done.” No, but it is a different mentality.

Mark Kenney: And I guess we take it for granted because we work in this industry. We just think like, “Oh, how could they not know?” But it’s like when I go to my mechanic, he’s like, “How did you not know? You know what you know, right?” And so, that’s why I always tell people, “We don’t get a second opinion,” because I hate when I say to people, “Yeah, you could have retired 5, 10 years ago,” and they dread their job, right? We could have gave them that time.

Keith Ellis Jr.: Well, it’s also interesting because, okay, so now they retire, they’re thinking about retirement, and then you start to look at impacts, so like what could potentially throw the train off the tracks or factor into the retirement where it doesn’t go as smoothly, and a couple of different things that come to mind. One is taxes. You know what I mean? Let’s say, for instance, Mr. and Mrs. Jones have a million dollars. They need $50,000 a year out of their portfolio to net the number that they need, because you got to pay taxes, to net the number they need to build the lifestyle that they want. Well, all of a sudden, the tax rates go up, and they have to start taking a little bit more and a little bit more and a little bit more because you have tax rates going up, then you have the cost of living going up as well.

Mark Kenney: So, you’re netting less, or you’ve got to take out more to net the same.

Keith Ellis Jr.: Or your lifestyle suffers, right? So, it’s like we don’t want the families we work with to have their lifestyle impacted by these unknown factors. So, a lot of times when we’re building a plan, we’re building a plan based around what we call base facts or the original strategy. Then you start to look at the different alterations or the different variables that could impact them. And it’s pretty interesting to show each family, “Hey, look, if things go this way in the versus this way,

here’s what that tax increase can do to your situation. Let’s start to unwind those taxes now and start to get ahead of this today.” So, you’re doing planning, future planning to help better position the family for the long run.

Mark Kenney: And I feel like that sentiment comes up a lot right around now because it’s tax time. And I always tell clients that like, listen, we love the CPAs that we work with, but CPAs look back one year.

Keith Ellis Jr.: Exactly.

Mark Kenney: Right?

Keith Ellis Jr.: Rear view mirror.

Mark Kenney: We look forward 30 years, right?

Keith Ellis Jr.: I love the car analogy. They’re looking in the rear-view mirror. We’re looking out.

Mark Kenney: Yeah. We’re looking at the windshield.

Keith Ellis Jr.: Exactly.

Mark Kenney: But, yeah, but bringing it back to behavioral finance, I think another something that comes up is the personality traits of different clients and what money means to them, and how you can look at maybe what their parents did with money and how they have taken on some of those traits. In some examples, they are the complete opposite, right? That their parents weren’t great savers or weren’t great with money. And some of those clients, those young clients, they’re the exact opposite. And so, I always think it’s like through learned experiences, through history, how you feel about money, and yeah, it’s really, really interesting.

Keith Ellis Jr.: I mean, I’ve seen so many folks come to the office, and then I meet their kids, right? And like their kids are maybe a lot of them are the exact opposite of their parents. Their parents saved every dollar, and they want to go live, live, live. And then there can be resentment. You know what I mean? I see that from time to time as well, like, “Hey, we’re working with the parents and now we’re working with the kids.” And the parents know how the kids are going to treat the nest that they’ve built, and there could be… So, they start to create all these trusts and vehicles to be able to manage the situation from the grave, I guess, for a lack of a better way of putting it. So, you’re right. Personal traits, behavioral traits, things like that go a long way.

Especially, what I like is when parents and kids sit down and really have true-to-life conversations, rather than almost treating it like a separation of power. You know what I mean? Like, here’s our client, here’s their kids. There’s no communication as to what’s coming, what the parents potentially envision. Do you want this for your grandkids’ education? Do you want this for multi-generational wealth? So, it’s very important, I think, to have open conversations. It doesn’t have to be the numbers. It could be more about just strategy in general.

Mark Kenney: I think you nailed it. I think there’s quite a shift. I would say the older, older people, so maybe our parents’ parents, right? They didn’t talk about money. It wasn’t discussed. You didn’t talk about politics, religion, and money. And so, a lot of them, I think, inherited money and maybe put them in a bad tax situation and weren’t prepared for that. And I think there’s a mind shift now that our clients now want to bring in their children. As you said, maybe not talk about the numbers, but understand the purpose of the money, things that they can do when they receive the money. Obviously, we know inheriting an IRA, the rules have completely changed now and shifted that tax burden onto their kids. So, it’s a conversation we want to have.

And then finding the purpose of the money, as you alluded to, I think that our clients’ children, they value experiences more, right? They value the trips to Europe, where they, our clients and their clients’ parents, they didn’t value that as much.

Keith Ellis Jr.: I would have to agree.

Mark Kenney: They worked hard for their money. They saw their parents not take any trips. I mean, I think you’re the same way. Like, my parents really never took vacations,

Keith Ellis Jr.: Right.

Mark Kenney: I don’t think they ever left the country. Everything was for us kids. And so, it’s a different mind shift, and we want to, yeah, have that dialogue, and I think we’re a great resource to have that, where we can bridge that gap between client and child or even grandchild and come up with these strategies.

Keith Ellis Jr.: And it’s really unique. This is why I think having a plan is so important. And at SHP, what we call it is our retirement roadmap, where it’s really that holistic plan where we look at your income, where it’s coming from, what are the tax ramifications, how is that going to impact the rest of your plan, your investments. Are they positioned correctly? Are they efficient in regards to fees, so on and so forth? We see that all the time. Taxes. What are different tax strategies that we could use both to help you but also the next generation, right? So, you keep more of your wealth rather than giving it to Uncle Sam.

Mark Kenney: I think I talk a lot of it with clients on, like, what accounts are best to leave to my kids.

Keith Ellis Jr.: Exactly.

Mark Kenney: I think people think, “Oh, I should leave my IRA to my kid.” And I’m like, “No, you know that Roth IRA you have? You’re not required to take that out, and your child gets that, or your grandchild gets that tax-free.” Or educating them about the step up in cost basis that non-qualified accounts that real estate has. You feel a lot better about spending down your IRA if you know your kid’s going to get your house tax-free when you move on. Like I said, I think a lot of people think, “Oh, I need to leave my retirement account.” I always tell clients, “That’s the worst account you can leave.”

Keith Ellis Jr.: It is, because depending on when you pass, where your kids are in their lives, maybe they’re in their highest earning years, and you’re trying to do something great for them, which is leave them money, and then all of a sudden this windfall comes, and it’s all pre-tax. Not only are they in their highest earning brackets, now they’re adding more income to that. And then what I always say is, what are the tax rates then?

Mark Kenney: Yes. It’s unknown, right?

Keith Ellis Jr.: That’s the unknown, right? So, I always say we can only play on the field that’s given to us, and for 2026 we know the tax rates are X, Y, and Z. We want to make sure that each family that we work with goes through a scenario where they could see the impact of tax mitigation in regards to their plan, both in the short term and in the long term, so we can help better position them, whether it’s through IRA or Roth IRA conversions, whether it’s through this past month, tax loss harvesting, where we can carry over those losses to the future, and help better get money out and liquidity out for them going forward. So, taxes, healthcare, and then legacy.

So, those are the five things that comprise the SHP Retirement Roadmap. And it’s not set it and forget it. Every year, there are new laws. There are new rules that have to be factored into the situation. And you also have to take into account Mr. and Mrs. Jones’ lives are changing. So, it’s an ongoing plan where we’re able to really, I think, maximize all the different strategies. And the good news is we have a team behind us, Mark, that help us implement and execute all these different strategies.

Mark Kenney: And that’s what differentiates us from the advisor down the street, right? They’re not talking about taxes. They’re not talking about Roth conversions. They’re just sending you a statement. And that’s why I love what we do and having a team behind us to fulfill all these promises. And as you said, yeah, this is an art more than a science. You need to be prepared to pivot. Your life can change, and you need to take advantage with all the changes.

Keith Ellis Jr.: So, like you said at the very beginning, times like these, in times like COVID, times like 2008 is where we really help our clients and remind them time and time again that having this plan in place allows us to wade through times like this and come out at what we believe to be better on the other side. So, having an advisor both to help build a plan, look at a plan holistically, strategize with you on a month-to-month, quarter-to-quarter, annual basis to better position both yourselves and your family long term, but then to also have them as a sounding board in times like these, and this is when we’re doing a lot of strategic planning. Roth conversions, when the market’s down, great time.

Mark Kenney: Correct. Yes.

Keith Ellis Jr.: But to have that sounding board and help better position you long term, this is what we do at SHP. And I want to thank Mark for coming in and talking through some of the behavioral finances and some of what it is that we’re doing right now for our clients. So, anything else that you want to add?

Mark Kenney: Yeah, I just want to say in closing, Keith, that remember, money is just a tool, right? Money, just like any other tool that a carpenter may have. We want to use that tool to best position you, your lifestyle, your retirement. You get one chance to do this. We want to make it as impactful as we can and bring emotion out of the equation so you don’t make irrational decisions. And that’s what we’re here to help you do.

Keith Ellis Jr.: Yeah. You couldn’t have said that better. And what I will say, and finally, is whenever we show someone a plan, I think when they come in and revisit that plan, and especially in times like this, and they see their plan is holding up over the long run, it gives them confidence, confidence to enjoy their retirement at which they deserve, confidence to spend, confidence to give. Whatever it is that their passion is, it gives them confidence. Having a plan, in my opinion, because how do you know what you can do if you don’t have a plan?

Mark Kenney: Yeah, confidence spend is a great one, right? I never want to tell a client like, “Yeah, you can’t book that Viking River Cruise,” right? And in 30 years, they find out that they could’ve done it. You can’t go back. And so, I think that’s a great point.

Keith Ellis Jr.: So, again, please come visit us, SHP Financial. If you do want a second opinion, if you want us to take a look, or if you’re just looking to start, start to build that retirement roadmap, start to look at that holistic plan, SHPFinancial.com. Thank you, again, and enjoy your weekend.Mark Kenney: Thank you.

[END]