The Next Market Crash | How To Get Rich In The 2023 Recession

What's up Graham, it's guys here. So I've got some good news and some bad news. The bad news is that more than half of Americans are already behind in the retirement savings. Elon Musk is bracing for a painful recession throughout 2023, and the housing market could drop by as much as 20 percent.

However, the good news is that right now could be the best entry point for stocks in the last 15 years. If you want to make as much money as possible—or basically, according to JP Morgan, if you wish that you could go back in time and invest in 2010—now could be that opportunity. That's why it's so important that we cover exactly what they say is going to happen, which investments are most likely going to make you the most amount of money, and why this one index fund strategy is expected to outperform just about everything else over these next 10 to 20 years.

Although before we start, it would help out tremendously if you index funded the like button and subscribe for the YouTube algorithm. It does help out tremendously. I post three videos every single week, and as a thank you, here's a video of a mantis shrimp. So thank you guys so much, and also a big thank you to public.com for sponsoring this video, but more on that later.

All right, now I've covered index fund investing before in the past in terms of what it is and why it's so profitable, but for anybody new, it's worth repeating because this encompasses everything that you need to know about making money. Now for those unfamiliar, an index fund is basically just a big container of stocks that you could buy into for one low price. So that way you get to own a small piece of everything.

Here's an example that I've used before in the past: imagine if I owned a thousand apartment buildings. Each one of them was worth a thousand dollars, and I offered to sell you one of them at that cost. That would be the equivalent to buying one stock in one company. But the problem is that you only have one apartment building or one investment, and what happens if it doesn't do very well? Or maybe you just happen to pick the one unlucky building that goes vacant? You lose all of your money.

So how do you prevent that? Well, here's the solution: imagine if I gave you an alternative option where you could give me that exact same thousand dollars, and instead of buying one building, now you get to own 0.1 percent of everything that I have. This way, you get an overall return of a thousand buildings. And in a way, an index fund is the exact same thing. The advantage of doing this is that index fund investing has outperformed 99 percent of individual investors over a 20-year period, meaning over 20 years you're going to make more money doing this than buying individual stocks. After all, when you look at the average investor's return from 1993 to 2012, it's horrible.

So this is the way you avoid embarrassment over holiday dinners. Plus, doing this is very little work; there's no experience required, and there's an index fund for practically anything you could think of. Like I kid you not, if you took Vanguard as an example, you have 266 different options that cover everything from large caps, small caps, international, communications, real estate, bonds, growth, dividends, blends of everything—it's insane.

So without further ado, these are my top five and a half favorite index funds of 2023, exactly how much they cost, how much you could expect to make, and how you could get started investing because not all index funds are created equal, and it's important to discuss the pros and cons of each so that that way, you could decide which one is best for you.

All right, so coming in at number five is one of my all-time favorites: VT SACS. This is a Vanguard index fund that encompasses the entire U.S. equities market all-in-one fund for less than 100 dollars. If there's a small, medium, or large cap stock that you could think of, chances are this fund owns a small piece of it. And with those five letters, you get exposure to 4028 different stocks.

The benefit to doing this is that if you're looking for one all-around fund that covers everything you could possibly think of, from basic materials to utilities, without complicating yourself with charts, graphs, numbers, and math—this is it. In fact, this fund is almost like the cornerstone of Warren Buffett's approach of never betting against America. And since its inception in 2000, it's returned an average of seven percent every single year, and in the last 10 years, it's returned over 12 percent.

However, there is a downside to a fund like this: like first, there is a minimum of three thousand dollars. Now, of course, if you want to go around this, you could buy their ETF version, VTI, which is essentially the same thing with no minimum, as long as you have enough to buy the piece of the stock. But you can't automatically reinvest like you can with the index fund, so it's a little bit more work on your end if you ever want to add on to this over time, but it's not that big of a deal.

Now, the second downside is that there is a 0.04 management fee for VT SACS and 0.03 for VTI, which is really cheap in the big picture. But if you want to go around this, you could also go with Fidelity's FISZX, total stock market index fund, which is newer and started in 2018 but has no expense ratio whatsoever. Yes, you heard that right—it's free. These fund managers are doing all of this at the cost of nothing, so use that to your advantage.

Although I will say this is only just the tip of the iceberg, and a few of these other options could wind up doing significantly better, and that would be one of the most popular of all of them: the FIX, otherwise what's known as the S&P 500 index fund, which you're probably tired of me talking about, but I'm back to talk about it some more.

For those unaware, the S&P 500 is largely considered to be the gold standard of the U.S. equities market because it contains the largest 500 publicly traded companies weighed by market cap. That means the top 20 percent of companies held within the fund include the likes of Apple, Microsoft, Amazon, Tesla, Google, and Berkshire Hathaway. Wait, what happened to Facebook? Oh wait, no, never mind.

Anyway, the S&P 500 has long been one of the prized indexes because their stocks are curated by an S&P 500 committee who purposely selects companies based on profitability, market capitalization, sector allocation, and liquidity. So this provides a stringent vetting process of due diligence that would be almost impossible for you to do on your own.

Now in terms of its performance since 2000, it turned slightly less than the total stock market index fund at 6.93 percent, but in the last 10 years, it's slightly outperformed with an average annual return of almost 13. It's also down 17 percent year-to-date, which means in hindsight it's a lot cheaper to buy today than it was a year ago. But of course, not everything is perfect, and as far as one of the downsides, there is a minimum of three thousand dollars to buy in, just like the last one.

So if you're watching this without the three thousand dollars to invest, you can also look at their ETF equivalent, VOO, which has no minimum, trades like a stock, and is pretty much the same thing. Now second, also like the previous one, there is an expense ratio of 0.04 percent, meaning this investment is going to cost you four dollars for every ten thousand dollars you invest. This is still really cheap. But thanks to friendly competition and the rates for a competitive market, Advantage Fidelity replicated the exact same thing with a management fee of 0.015 through their FZROX fund, which at that price they may as well just make it free for additional marketing. But you know what? That's none of my business.

In addition to those two options, you may want to consider adding a third one onto the mix, and that would be number three: an international index fund like VTIAX. However, before we go into that, I just want to say sometimes being an investor could feel like riding a roller coaster, and during uncertain times, it's important that you have as much information at your disposal as possible.

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All right, now in terms of index funds, so far we've really only covered the U.S. equities market, but when you really get into it, that's just the tip of the iceberg. So an international index fund covers everything else outside of it—from emerging markets, Europe, the Pacific, the Middle East, North America—plus some of the largest holdings are the companies that we use day to day, like Nestle, semiconductors, Samsung, Toyota, and so much more.

The advantage here is that as other countries grow and develop through stock prices, increase, and your investments do better. But there is a bit of a catch: over the last 10 years, international index funds have remained fairly flat, and throughout the last two decades, the United States market has outperformed just about everything else out there. Although just keep in mind that that isn't always guaranteed to happen.

Throughout history, there have been multiple times that international markets have outperformed the United States, like throughout most of the 1980s and 2000s. There's certainly a chance that that could happen again, especially if we could be seeing a 2023 recession. Now in this case, something like VTIAX has only returned 3.2 percent since its inception in 2010, which sure is very disappointing when you compare that to something like the S&P 500.

But it'll pay you a dividend of roughly 3.64, so that means for every ten thousand dollars you invest, you'll get 364 dollars in passive income. Of course, just like the others, Vanguard does have a three thousand dollar minimum, and because international stocks take a little bit more to facilitate, there is a higher expense ratio of 0.11. But there's also their ETF version, IXUS, with a 0.07 expense ratio, and you could buy it anywhere that you could buy stocks, like with our sponsor public.com, Graham.

Of course, Charles Schwab also has their ETF version, SCHF, with a 0.06 expense ratio, or Fidelity with FTSIX, who charges 0.035. So just Google my preferred broker international ETF, and voila—like magic, it’ll appear. There you go.

And when it comes to myself, I personally see this as a bit of a hedge against my portfolio, so that's why I keep about 15 to 20 percent of my index fund portfolio in this and then the rest is spread throughout a few of these other options, including fourth: a growth index fund like VIGAX. Like I mentioned earlier, there's an index fund for anything that you could think of, and even though we could focus on dividends, small caps, or technology, this one focuses on one aspect that could do really well.

This works by taking the U.S. markets, filtering out everything that does not have high growth potential, filtering out again any smaller companies that were only surviving because of endless money stimulus printing, and voila—you have a growth fund that isolates the likes of Apple, Microsoft, Amazon, Home Depot, Google, Visa, Mastercard. As of now, it contains a mix of 249 companies geared towards the businesses that will either do really well or really bad.

Since its inception, its annualized return is almost seven percent, after already going down thirty percent from the peak. In other words, this one is very high risk, high rewards. So if you would imagine a seesaw, this would be near the edge with the most gain or loss. If you aren't prepared, for example, from 1997 through 2013, growth stocks like this did the worst out of just about every category, and the winner during that time frame was emerging markets. That just means that you could not build a portfolio off of what did best in the past, especially in the short term.

So it's essential that you do not put all of your eggs in one basket unless you want to post screenshots on WallStreetBets for your wife's boyfriend. As far as this fund is concerned, it shouldn't come as a surprise that there is a three thousand dollar minimum as well as a 0.05 expense ratio for managing the fund. But you could also go for the similar ETF, VUG, which has a slightly lower expense ratio of 0.04 percent, and all of that could be yours for 225 dollars.

Although if you're truly lazy and you don't want to have to worry about balancing portfolios, managing risk, and buying 15 of that, then you could take the easy way with this one, and that would be with number five: a global stock market index fund. This is what happens when you combine everything that I've just talked about, blend them together, add in a pinch of emerging markets and a hint of growth, and then all of a sudden you get something like VTWAX.

This gives you exposure throughout the entire world with 9548 stocks and a balanced combination of large-cap growth and value companies. This means that you'll get some technology along with dividend-paying oil companies along with international companies. Now even though this fund was just started since 2019, it's returned an average of seven percent a year, and if you're buying today, it's 20 percent cheaper than it would have been at the beginning of the year. So how's that for a holiday discount?

On top of that, you'll also be getting a dividend of 2.4 percent that you could then use to buy even more of it to get even more dividends. Of course, no surprise, since you do get the convenience of having everything you need blended together, you will pay a higher management fee of 0.1 percent, which isn't terrible. But if you go to the ETF version, VTI, that only has a 0.07 fee, and there you go. I just saved you three dollars for every ten thousand dollars that you invest, so just don't spend it on Starbucks.

Now just remember, with an index fund, you're able to set up recurring investments to dollar-cost average into the markets. You're able to buy in with a precise dollar amount down to the penny, and everyone buys in at the same price at the end of each trading day. But that usually comes with the cost of a higher minimum investment. The funds that generally cannot be transferred from broker to broker without paying a hefty fee.

But on the other hand, an ETF trades just like a stock. There are zero minimums as long as you could just afford the price of a share, and you could transfer them between brokerages in the event you want to switch. To be honest, it's probably not going to make that big of a difference for almost all of you watching, but it's worth covering, so that way you're not scratching your head wondering why does Graham move his hands so much?

And finally, as an honorable mention, we have to talk about something that's done so horribly that it actually might make a good safety net moving forward, and that would be bond market index funds like VBTLX. Here's the thing: when it comes to investing, there's a strategy called the 60/40 portfolio that says you hold 60 equities like stocks and 40 bonds. The goal is that this provides the ultimate stability because when stocks go down, bonds hold their value and pay a dividend, and when stocks go up, then bonds do their thing by normalizing your returns.

However, in 2020, something interesting happened: bond values plummeted because the Federal Reserve lowered interest rates to zero while printing a lot of money. And because of that, the 60/40 portfolio is on track for its worst year since 1936. This is by all accounts probably an anomaly, and that leaves the door open for a lot of people to scoop up bonds for cheap. And that's exactly what JP Morgan believes is going to yield a 7.2 percent return over the next 10 to 15 years.

That's why something like VBTLX could be a good padding for your portfolio with a 4.4 yield that since inception has delivered a return of just over three percent. And for a small part of your portfolio, this could end up doing pretty well with the 0.05 expense ratio. As far as what I do, I do a combination of everything. I personally hold most of my money in U.S. equities, but I also have 20 percent spread throughout international index funds and another 20 percent throughout treasuries, which accomplishes almost the same thing as a bond minus the price volatility.

To me, this gives a ton of diversification, some risk, and a lot of stability while maximizing the returns that I'm able to make. It's probably not perfect, and hindsight is always going to be 20/20, but that's what I'm doing. And with a few funds, you'll be well on your way to outperforming the vast majority of investors out there by keeping it simple and thinking long-term.

So with that said, thank you guys so much for watching! As always, feel free to add me on Instagram, and don't forget our sponsor, public.com, is a bonus down below in the description for anyone who wants to claim it. Enjoy! Thank you so much and until next time.