My Investing Plan For 2021

What's up you guys? It's Graham here. So, arguably, 2021 is, how should we say, one of the more unique times of investing. This is not your standard year of more of the same everything is fine, but instead it's a unique combination of an economic shutdown, a highly contagious illness, trillions of dollars worth of stimulus, record low interest rates, and record high stock prices that leave even the best investors scratching their head wondering, "Why didn't you hit the like button?" and "What's going on?"

After all, with interest rates at their all-time record lows, you can't invest in a treasury bond anymore without pretty much being guaranteed to lose money. You can't keep too much in a savings account either because over time your money is going to be worth less with inflation. Now, real estate investing could be an option, but with a dwindling supply of inventory, actually finding a good deal is really hard to come by. And with the stock market, sure, you could get in, but the current economic climate might hit some businesses harder than others. There's definitely a mental barrier that a lot of people have when it comes to investing near all-time highs.

But given some of these crazy price swings that we've seen over this last year with some pretty big winners and pretty big losers, I felt like it would be a good idea to go over my own investing plan and where I'm going to be investing most of my money this year. In Bitcoin? Just kidding. But seriously, I think it's really important that we set ourselves up on a plan that we could stick to for the rest of the year ahead of time. That way, you're not going to be caught off guard in the event something happens, and then you begin making impulsive mistakes because of how the market reacts.

But before I go into that, we gotta talk about this very unsettling article from CNBC. They found that over 90 percent of you watching don't smash that like button for the YouTube algorithm. This is a tragedy that only you could prevent by going to that little thumbs up button and then pulverizing it for the YouTube algorithm. Doing that helps up my channel a ton. It's really fun to do, and best of all, once you do it, I'm finally going to stop asking. So, with that said, thank you so much for doing that, and now let's begin.

There we go, it worked! Alright, so what makes this year so unique and so much more different than any year prior is that we very much have what's called a K-shaped recovery. As the illness began shutting down parts of the economy and parts of the world, some sectors and people saw their income and wealth skyrocket, like the upper line of the K, and others on the bottom line of the K saw their incomes dry up and businesses fall apart. This adds a very confusing layer on top of everything because even though the markets have been favoring the investor, we still have millions of people unemployed, evictions and foreclosures are continually postponed, and some industries are just not able to make it through.

Think of it almost like this stormy cloud that's looming over the money party where eventually these problems need to be dealt with, and until that, the worry is that we're growing into a bubble. Well, anyways, that's where we are right now, and given that it's easy to see why so many people are hesitant about investing right now, or maybe they want to wait for the market to come down before they invest. But is that the smart thing to do?

So, here's my plan. First, we gotta talk about the golden child of the channel. This is the topic that largely everyone wants me to talk about and cover, and that would be real estate. This last year has been by far one of the craziest, most unpredictable markets I have ever experienced, and I say this as someone who got into the real estate market in early 2008, right before prices came tumbling down. I also say this as someone who owns eight properties throughout Los Angeles and, more recently, Las Vegas.

Now, what makes real estate so different than any other investment over this last year is its resiliency to everything that's going on, to the point where it never really went down in price. In fact, real estate just kept going up and getting more expensive for a few reasons. One, when the Fed reduced interest rates down to pretty much zero, it subsequently reduced mortgage rates alongside it. That meant that people could afford to pay a higher price for the same monthly cost, and that led to a big increase in demand.

Now, number two, there's also a big shortage of inventory. Like, people who lost their jobs are not going to be in the market of packing up and moving. People who put their mortgage in forbearance are not selling, and most would-be sellers don't want random people walking around their house right now. That's caused a massive shortage of available homes for sale, thereby driving up the price of everything else that is listed.

And third, they simply can't build enough homes to satisfy all the demand. As I'm sure anyone in construction right now can tell you, materials are getting more expensive, they're taking longer to deliver, and building restrictions make it that much more difficult to keep up. Combine all of that together, and you really have the perfect storm to bolster up real estate prices higher and higher and higher.

See, real estate is not like the stock market where you could panic sell by hitting a few buttons and then you instantly get rid of it. Instead, it's a very lengthy and expensive process that usually takes weeks or months at the very least. A home is really a place that people tend to settle in long term, so it's going to be less prone to market fluctuation short term. But as for what I think is gonna happen, I personally don't see real estate values coming down anytime soon.

I would expect to see more inventory coming on the market this year in 2021, but as long as interest rates stay low, the real estate market should hold fairly well. I think the biggest risk right now to real estate is probably interest rates. When the Fed eventually does raise rates back up, it's going to squeeze the affordability of buyers, and prices because of that might begin coming down. However, that does not necessarily mean that housing is going to get cheaper. Even if housing prices do go down, if interest rates go up, the price you pay monthly could stay the exact same.

For example, it's the same monthly payment to get a mortgage of two hundred thousand dollars at a four percent interest rate as it is a two hundred forty-two thousand dollar mortgage at a two and a half percent interest rate. So, even if housing prices do go down, if interest rates go up, the price you pay monthly could stay the exact same. That's why I believe the biggest deterrent for housing prices right now is going to be how quickly do interest rates go up, how much inventory is on the market, and how many buyers are out there willing to purchase a home.

Obviously, this type of real estate market can't last forever, but at least for the next few years, I could see real estate doing pretty well as long as demand stays the same and interest rates stay low. Now, as far as what I'm doing in real estate this year, the honest answer is probably nothing. Now that doesn't mean that real estate is not a good investment this year or that there are no good deals out there, but after buying eight properties over the last ten years now worth about eight and a half million dollars, I just feel like it's the smart idea to take a step back and reinvest my money elsewhere so I could do a better job diversifying.

Now, obviously, if the perfect deal comes up, or if Meet Kevin and Andre Drake want to all pull our money together and buy a big apartment building somewhere, I'm open to it, but that's not my priority. But for those of you who do want to invest in real estate this year, then here's my advice. One, you gotta wait for the right deal. I would never advocate rushing in to buy something just because interest rates are low or just because you're impatient to buy something as soon as possible. Never get carried away into buying something and only buy something if there's enough upside on the right deal and when the numbers make sense.

Second, you should really only buy something if you're planning to hold it at least five to eight years. The reality is anything could happen in the short term, and even though the Fed has openly said that they don't plan on raising interest rates anytime soon, nothing is impossible. Planning to hold on to the home for at least five to eight years is going to ensure that no matter what happens in the short term, long term, you should be okay.

And third, the value of the home should come second to cash flow. Anytime you invest in real estate, it's really fun to watch the numbers and see your home going up in value every year, but as cool as that could be to see, that money is somewhat meaningless unless you're planning to sell or refinance. So instead, focus right now on the bottom line, and that would be cash flow.

Now, the good news here is that overall, when we look back in history, rents tend to remain relatively stable regardless of how the overall real estate market performs. So, by putting cash flow first, you should have a much more stable investment. Next, let's talk about the stock market, because this is where my investing plan of 2021 really comes into action.

Last year, in 2020, I ended up investing way more money than I originally anticipated into the stock market, spread throughout three dozen individual stocks and an S&P 500 index fund. A lot of those stocks were purchased around April and May of 2020, and overall, my entire portfolio since then is up well over 50%, with some of the stocks even doubling and tripling in price by a random stroke of luck.

Overall, my thought is that the stock market seems a bit euphoric right now, and when people are making money hand over fist, it's easy to want to jump in and be a part of that. However, I'm going to quote something cheesy that people don't like hearing, but you know what? It's the truth: the stock market can remain irrational longer than you could remain solvent. Or in other words, that just means that the stock market can and will outlast whatever you think it's going to do. It'll keep going up until you've run out of money, and then it will go up even higher, or it's going to keep going down until you've invested your very last dime, and then it's going to go down even further.

So, given all of that, as long as you have an investment time frame of more than 10 years, the best thing that you could do is ignore all the noise out there and just keep investing. My plan this year is to invest about 85 percent of my money in an S&P 500 index fund, and that's it. Super easy stuff. It might sound kind of cheesy, but it's my weird idea of fun of just automatically investing in the markets every single day regardless of where it's at, even through all-time highs. I keep buying in, and long term, I'm going to average out through the highs and through the lows.

Now, the other 15% of my stock market money is likely going to be invested in individual stocks that I believe in long term. Lately, I've been investing my money in solar and other green energy companies because not only is this a cause I really believe in and want to stand behind, but I think they're going to be doing really well as more people embrace renewable energies.

Now, I'm only allocating a small amount of my money here because these have been very volatile lately, and so far, the prices have been going through the roof. But I think for a small portion of my overall portfolio, it's gonna make sense long term. And lastly, we have my other category of investing. Lately, it's given me a lot of peace of mind just to keep a big chunk of cash sitting on the sidelines just in case the deal of a lifetime comes up, and for me so far, that's been centered around startup investments.

In 2020, this is a brand new world for me that was introduced through Ask Sebby. Now, with these types of investments, it's an understatement to say that they're extremely risky. It's nearly impossible to exit, and there's a good chance you're going to lose all of your money. But if they do well, then they typically do really well. So, I've taken the approach that I want to expand my investments beyond the traditional stocks and real estate and allocate a small portion of my money into these types of companies that I could basically just set and forget about.

I basically just pretend that this money doesn't even exist anymore, and if something happens, great, and if not, then I've already mentally just burned it to the ground. My understanding is that most angel investors will throw their money at 25 to 50 different companies with the expectation that maybe one or two might pan out. And even though I'm fairly optimistic about everything I've invested in so far, I'm not naive to expect that each and every one of them is going to turn out to be a billion dollar IPO.

But that's not stopping me from seeing a huge opportunity in the fintech industry, and that's where I want to invest my money in 2021. Now, of course, besides that, we could also argue that one percent of my money is going towards Bitcoin and Ethereum. It's really just another way to invest my money, and part of me would really love to invest in something like a Ford GT, for instance, which lately has been climbing up in value. But we'll see on that; no promises.

Let me know what you think about that car down below in the description, though. I'd be curious about that because that is something I would really like once at some point. So, overall, here's my investing plan for 2021 and some key takeaways here that might also apply to you.

First, I think it's important to keep a cash reserve just in case anything is to happen to me. This is really just my peace of mind to help me sleep well at night, knowing that if anything were to happen, I have enough to be okay. Second, I'm continuing to invest about 85% of my money into the stock market. I'm doing this just by dollar-cost averaging into the S&P 500 and keeping it very simple.

I like the hands-off, stress-free approach of this investing style, and that leaves me with more time left over to focus on other ventures that just have a higher ROI. Even if this investment ends up going down in the short term, I'm investing money that I'm not planning to touch or use for the next 20 years. That way, I have time to ride out any short-term fluctuations in price.

Now, third, the other 15% of my money is going to be invested in the other category. This includes individual stocks, startup ventures, and other business activities, and maybe even just a small, small, small, small portion of cryptocurrency. I say this because about one percent of my portfolio is made up of Bitcoin and Ethereum. So, as my overall portfolio grows, so will my allocation towards this.

This gives me just a little bit of exposure to everything else without getting carried away and without taking too much risk. And fourth, if I do use that cash position, it's going to be with a really good opportunity. This might be buying real estate, might be investing in a business or a startup. I'm just leaving this one to whatever opportunity comes my way, and if nothing comes up, then that's going to be my safety net if something were to happen.

So overall, my biggest takeaways for everybody watching is to make sure to always keep an emergency fund, invest consistently, and make sure to diversify your investments so that you don't just rely on one single investment to get yourself through. It's best to keep your money in as many different places as possible so no matter what happens, long term you'll do well. And most importantly, don't panic sell in the event the market goes down.

The best thing that you could do is stay the course, stick to the plan, keep consistent, and keep buying. Study after study has shown that people who hold their investments, don't sell, and keep buying in end up making the most money long term. And as long as you smash the like button, you're gonna be okay.

So, with that said, you guys, thank you so much for watching. I really appreciate it. As always, make sure to destroy the subscribe button and the notification bell. Also, feel free to add me on Instagram. I posted pretty much daily, so if you want to be a part of it there, feel free to add me.

There’s my second channel, The Graham Stephan Show. I post there every single day I'm not posting here, so if you want to see a brand new video from me every single day, make sure to add yourself to that. And lastly, if you guys want four free stocks, use the link down below in the description, and Webull is going to be giving you four free stocks when you deposit $100 on the platform, with those stocks potentially worth all the way up to $1,600.

So, if you basically want free money, use that link down below. Let me know which four free stocks you get. Thank you so much for watching, and until next time!